Session #6 -- Business

You may never have to deal with this aspect, OR you may have to do everything yourself.

In the world of print, the editors are less involved in the ad business.

In my own experience, the editorial and advertising aspects of Web publishing are more intertwined.

We do discuss the business end of things much more in meetings, what kind of impact our editorial decisions will have on traffic.

And traffic = impressions = revenue.

-- content / editorial costs -- salary and freelance

-- technical costs -- web hosting

-- ad sales -- keep in mind that ad sales people make more than editors

-- general business-related costs

Recall the Internet history: commercial use was actually prohibited in the beginning!

Compare that with today, where many people see the Internet as a get-rich tool.

Factoid: For the first time, Internet advertising revenue totalled $1.3 billion through the nine months ended September 1998. (The first time it has exceeded $1B within a single calendar year)--

(Internet Advertising Bureau Press Release 2/9/99)

Web ads expected to exceed $7B by 2002 (3/17/99) - Simba Information.

Combined web/online ad expenditures, which also include media spending on services such as America Online, will reach $7.1 billion in 2002, a 238% increase over $2.1 billion in 1998, the report predicts.

TV is broadcast, reaching huge cross sections of the population.

Web is single-cast, reaching a single, interested person.

Web visitors are active, not passive like TV.

Web ads reach a narrower target audience … TV is more general.

Lower ad-to-edit ratio

(typical web page w/banner is 90% edit, TV about 60% programming) (IAB)

Web ads are smaller, less likely to have music, video, animation, etc.

Web ads take visitor away.

In print, no guarantee that your ad was seen, but Web measures impressions.

Lower ad-to-edit ratio

(typical web page w/banner is 90% edit, print about 50%) (IAB)

Web ads are much smaller, less room for information or brand building.

Web ads are embedded in editorial.

Commercial use of the Web is still relatively new, and you'll encounter a lot of flexibility.

There are so many out there, new ones are being invented all the time.

Some of these names are what we call things at ZDNet and may be called something else at other places.

The success of banner advertising is under hot debate.

- People can turn off images, cached views may be undercounted, views can be by bots.

- People may just not look!

- Web ads take visitor away.

- Still some resistance to commercialism on the Web

(Standard Sizes: http://www.iab.net/advertise/content/adintro.html)

"extra" ad on zdnet

Placement: top, bottom, mid, mirrored

(examples: zdnet, usa today)

This is important to publishers, because if the ads fail (bad creative) then no one clicks, then revenue drops.

Despite all the argument over whether banner ads work, there is much agreement on one thing:

Unlike TV/Radio, where the ads are intended to imprint a brand in your brain, so you buy something the next time you're in the store, Web ads just need to get you to click.

What types of banners work: (look at members.tripod.com/~PublishOnline/ads)

- Animation / Rich Media

- Color

- Intrigue

- Free

- Sex

Of course, it has to be, when faced with so much competing noise.

How much information can you pack into 75 words on a full-page ad, when the primary purpose has to be "impact," "brand recognition" and "quick read"?

You don't believe what you read in ads, and neither does anyone else.

How many agencies have explained to you that advertising is a branding mechanism -- good results don't translate into increased sales.

Like the design of ads, pricing models are usually very flexible as publishers and advertisers see what works.

CPM: Cost Per Thousand impressions

- Most common. This is "selling space" more akin to print.

- You get paid just for showing the ad.

- Pricing ranges from $10 - $55, with $20 - $40 most common.

- Specialty sites and highly targeted ads may go for $30 - $75 range.

( Number of Impressions Bought / 1000 ) * CPM = Gross Cost

( 1,000,000 / 1000 ) * $40 = $40,000

- advertisers love it / publishers hate it (what if the ad sucks? Everybody loses)

- users still see the ad, but you don't get paid for that exposure, only for the click.

- pricing depends on cpm AND click-through rates.

Example: your click through = 2%, you are charging $30 CPM, then your CTR = $1.50

(1000 users x 2% = 20 clicks. … $30 CPM divided by 20 clicks = $1.50)

- As click-through drops the prices will go up. Currently they range from 40 cents to $1.25

If 1% of your visitors click on banners, that is 10 clicks for every 1000 impressions.

If you charge $20 per 1000 impressions (CPM=$20) then each ad click should cost $2.

If 1.5% of your visitors click on banners, that is 15 clicks for every 1000 impressions.

If you charge $20 per 1000 impressions (CPM=$20) then each ad click should cost $1.33.

Transactional (Pay-per sale / per inquiry / per event)

Think about what a click gives the advertiser, not really very much: This model only pays when the ad is a success.

- More useful for commerce oriented sites than publishing.

- This is what the affialiate programs are: Amazon, CDNow, etc.

- There has to be a natural match between the site topic and product advertised.

- per lead = about $5 to $10, per sale about 25% - 30% of sale price. (Clickz)

- The problem with this is tracking / fulfillment. (Very hard to pass information from one web site to another)

Subscription-sponsored Web Site

Example, Slate

- Current content free to everyone

- Community, Archives, Email, Printout and other services for subscribers

- Free means circulation (and ad revenues) go up.

$19.95 per year

Current subscribers: 30,000

Total $ from subscriptions: under $600K

Total ad revenue: ???

Total operating costs: were $5M in 1998

Example, WSJ Interactive

Introductory rate: $60 per year ($30 if you subscribe to print)

Current subscribers: 265,000

Total $ from subscriptions: about $16M

Advertising Resources

(look at members.tripod.com/~PublishOnline)

Resources

ClickZ: The Ultimate Guide To Online Marketing, Advertising and E-Commerce.

FASTINFO.ORG

IAB - Advertising ABCs

DoubleClick Learning Center

Web Marketing Today

The Sevloid Guide to Publicity_ Banner Exchange Services

Internet News: Advertising Report

Refer-It.com -- Guide to Affiliate Programs

LinkExchange: Grow online traffic and revenue for your small business with LinkExchange.

HyperBanner Network, the international one stop-shop solution for the website owner.

Exchange-it is a free banner exchange program, a web advertising solution...

ZDNet _ ZDNet Clicks

ZDNet Rate Card

USA Today Rate Card

DoubleClick Local Rate Card

New York Times Rates

Microsoft Online Sales