Inside AdWords and Contextual Advertising: The Tipping Point

How-to” and “best practices” will always be the mission of Content Advertising. Tips, tricks, and advice to manage contextual ad campaigns will be my focus.

Let’s take a step back, though, and reflect on the evolution of online content advertising. To successfully buy contextual ads, it helps to understand why it’s so important now. Plus, you need to know why it will increase in importance.

Back in 2003, Google pioneered a technology for automatically displaying text advertisements on Web sites. Newspaper groups were among the first Web sites to test the new ad network when Google announced AdSense.

Content targeting technology applies the precision of search advertising to the rest of the Web — Google identifies the meaning of a Web page and then automatically serves relevant ads. This service extends advertiser reach, provides users with highly relevant ads, and enables Web site publishers to monetize content pages.

Charter participants included Knight Ridder Digital properties (San Jose Mercury News, Detroit Free Press, Miami Herald, Philadelphia Inquirer) and HowStuffWorks. Content-targeted ads also appeared on Google Groups, Google’s search site for online newsgroups.

Initially the service was intended mainly to help Web site publishers make money on unsold ad space. Most online ads were banners, sold via direct negotiation between the advertiser (or advertiser’s agency) and the site publisher. Google convinced publishers to “monetize” unsold space by displaying ads supplied by Google AdWords.

Not everyone was wowed by the launch of AdSense five years ago. Some advised advertisers to proceed with caution.

Web site owners of all sizes flocked to the new Google AdSense program. Many of the larger ones embraced the concept of earning money via what would otherwise be wasted space. Owners of smaller sites found AdSense to be the only way they could earn advertising revenue. Direct negotiations and personal relationships with advertisers were too time-consuming and expensive.

Thus was born the concept of self-serve advertising, ads purchased without the assistance of a sales representative. A minor revolution began in the online advertising world. Almost overnight, the business of publishing small, targeted Web sites became a potentially profitable undertaking. Advertisers of all sizes could afford to reach small niche audiences without the expensive overhead of negotiations.

In the years that followed, further advances in content advertising have altered the online advertising landscape dramatically. Google gave advertisers the ability to place static banner ads via the content network. That made the system more palatable to finicky site owners who didn’t want to give page prominence to aesthetically unattractive (and sometimes wildly irrelevant) text ads.

Sometime during the past two years, a tipping point was reached. Rather than view AdSense as a way to earn a few percentage points of additional revenue for unsold ad space, site publishers of all sizes have started using AdSense and ads from the relatively newer, and still text-only, Yahoo Publisher Network as the main way to serve ads on their sites (eliminating the time required for negotiation and coordination means fatter profit margins).

As a result, the size of the “self serve” market for advertisers has mushroomed, giving them more click inventory in vertical slices. The potential content click inventory for some advertisers may soon exceed the increasingly-competitive and expensive search click inventory.

What does that mean to you as a marketer?

The Big Three Dominate

Google, Yahoo, and Microsoft just snapped up three of the biggest online advertising networks: DoubleClick, Right Media, and aQuantive, respectively. The majority of online ads are now served by the three leaders in search advertising. Further consolidation is likely, since organic growth may not satisfy the voracious appetites of these giants.

Will AOL’s, the biggest network outside these three, eat or be eaten?

More Ad Media Types

Google has been in the forefront of giving advertisers a growing number of non-text, non-banner ad media types: animated (Flash or GIF) banners and video ads for example. Google’s testing Gadget Ads, which are like standalone “code kiosks” that can be embedded into Web pages like the user-constructed iGoogle.

They’re pushing into other electronic channels as well: for example, mobile ads for mobile devices. Eventually, electronic content ads will move into every possible medium and channel, such as video consoles.

From Online to Offline

Google is testing and rolling out ways for advertisers to use online tools to place offline ads. Advertisers can place ads in print (newspapers), audio (radio) and video (TV). Google supplies tools for creating the appropriate media types. Advertisers have access to low-cost resources for producing audio and TV ads.

Google’s system provides some of the advantages for placing and tracking that have contributed to the popularity of search advertising. Offline ads can be bought on an auction basis, and results can be tracked via some ingenious online mechanisms. For example, Google supplies audio advertisers with a free bank of toll-free phone numbers, so response rates of individual ads or radio stations can be easily tracked.

But for all the advantages Google (and eventually others) can bring to offline advertisers, there’s still a missing dimension that makes online content advertising so compelling and valuable: automatic matching of ad content to adjacent “editorial” content.

But that’s just a software problem; technology under development will, for example, analyze the content of recorded radio broadcasts (or podcasts) and automatically insert relevant advertising during the “commercial break.”

If you’re not excited about content advertising now, just wait until tomorrow.

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