Friday, November 16, 2007

Search And Online Advertising: A Continual Evolution


by Ellen Siminoff


ONLINE ADVERTISING HAS EVOLVED SIGNIFICANTLY since Yahoo placed the first display ad on its home page as a test to see how users would react. Back then, no one was really sure online advertising could be a business model. But users responded, and Yahoo went public in 1996, the same year that the Internet Advertising Bureau was formed. In a short 10 years, the IAB reported that Internet ad revenues neared $17 billion in 2006.


When the first paid search ad appeared on GoTo, many thought it was dreadful and would confuse users. Again, users responded positively, and by 2006 search accounted for the largest portion - 41% of total Internet ad spending, according to the IAB.


Since the early days, we've seen countless innovations in online advertising formats, targeting methods, and payment models. We still have basic classified ads on newspaper sites and banner ads on home pages, but we also have flash ads in many sizes, branded microsites, video ads and widgets that encourage interaction with users. Advertising agencies have evolved their services to include creating and placing ads in many different formats, and linking online and offline advertising.


Today, we can not only target by the sites we think our customers frequent, we can follow them around the Web and target them based upon the other sites they actually visit. We can also target them based upon the words typed into a box, and from where those words are typed through search geo-targeting. We can also retarget searchers elsewhere on the Web. Facebook's recent announcements take targeting to a whole new level, based upon age, location, interests, and other online activity.


Overture's CPC model that once seemed revolutionary is now standard, and advertisers are trying out CPA (cost per acquisition). Quality scoring makes CPC less than straightforward for the advertiser, but increases relevance for users. CPM based on reach and frequency now seems outdated with the potential of conversion attribution. The technology behind Google and Yahoo is not only being developed to make their content more relevant for users, but to make the advertising as relevant as the content.


The two constants that have enabled the businesses and thousands of individuals employed in the online advertising industry to succeed through these years of rapid change are a willingness to experiment and smart data analysis. Many of the standards we now see were once thought to be harebrained, leaving naysayers scratching their heads and eventually going out of business. Much of the experimentation has come out of smart analysis of the massive amounts of data we have at our disposal. We now know not to always trust our intuition. If the data doesn't back it up, we try something else.


Google's quality scoring algorithms came directly out of finding another way to analyze all of the click, cost, impression, and bid data Google has at its disposal. Facebook's nascent targeting model is another evolution of the creative use of data. Analytics, and the creativity and technology behind it, is what makes our industry so exciting. To me, the online advertising industry can be summed up in two words: experiment and analyze. Experiment and analyze (and don't ever stop).