Top 5 Myths about Online Advertising

Advertising is the primary revenue source for the majority of online publishers who don’t sell anything or charge a subscription. Analyst briefings and blog posts are predicting a gloomy ad market for the year ahead. What does this mean for publishers? What’s important is separating fact from hype, and sifting out the hidden opportunities.

Unfortunately, myths abound, especially in times of flux when optimistic and pessimistic projections battle for the right call. Here are five myths that I would like to counter:

1. Myth: We’re looking at the same sort of bear market as in 2001.

At least with respect to online advertising, we’re living in a different world now, and several factors set this downturn from that of 2001:

•More people are online. The amount of online traffic has surged, as the number of Internet users as well as time spent online per user both continue to grow.

•Search has given rise to contextual advertising. Google gave rise to search, and AdSense gave rise to contextual and search advertising, which is now a $10+ billion business in the US alone, and a performance-based advertising form that withstands retractions in ad spend better than branding-/awareness-focused display advertising.

•New revenue models exist. Beyond CPM pricing, CPC, CPA, CPL pricing models have allowed publishers to monetize their traffic differently. The new revenue models have generally rewarded conversion, leads and new business, thus emphasizing online advertising’s capacity for measurable performance.

•Technology has improved considerably. Measurement and tracking, ad delivery, formats, and engagement methods have all benefited from technological innovation.

2. Myth: Display advertising has overtaken contextual/search.

The rapid proliferation of vertical ad networks in recent years has created the perception that display advertising has overtaken contextual. However, not only is contextual/search larger (44% to display’s 33%), current changes in the online advertising market are only going to see the gap grow: eMarketer projects search/contextual to reach 50% of the interactive ad market by the end of 2010.

3. Myth: Referral/commission offers are a better long-term form of revenue generation than ads.

The reality is that there is no such thing as either/or when it comes to monetizing content. Unless you have exclusive representation by a network or agency, you should find the right blend of monetization options for every page or category of page.

•Referral/commission options can be an excellent primary (but not sole) monetization vehicle for pages with content targeted to the offer(s), and highly-targeted (usually search) traffic.

•Contextual advertising does well on the same sort of specific content, and complements referral/commission offers well. It gives visitors other options if they don’t want to be forced down the sales funnel, especially if they’re in information-gathering mode instead of buying mode.

•High-volume incidental or repeat traffic is best monetized through a CPM display ad network, since there might not be enough contextual relevance for referral/commission or contextual advertising to perform well.

4. Myth: The key to making the most money from online ads is picking the best ad network.

This is another common either/or canard that publishers should not fall into. Publishers should not abandon one ad network in favor of another with the hopes that it turn out a higher eCPM, when multiple networks’ ads, working side-by-side on the same page, is likely to perform better. Different networks can create a variety of ad formats and advertisers, which can target a diverse visitor base. Finding the right mixture requires using an online ad optimizer like YieldBuild, or if you’re so inclined, multivariate or even a series of A/B testing experiments, to achieve the best benefit.

5. Myth: The more ads on a page, the better, when it comes to maximizing revenue.

It seems intuitive that the more ads you have on a page, the more likely visitors will see one that resonates with them and click. However, setting aside CPM ads (which, naturally, pay out solely on a by-impression basis), our testing at YieldBuild has shown that, with some sites, you wouldn’t even want to insert the maximum allowable three ad units per page. We highlighted an example from HubPages.com that showed page CTR improving when the number of ad units was 2 instead of 3.

This post has been written for Profy by Jason Menayan, the director of marketing at YieldBuild, the online ad optimization service to address some of the myths about online advertising from the advertising industry point of view. Prior to his role at YieldBuild, Jason served as marketing manager at HubPages, where, as the first employee hired by the company, he grew the publisher base to more than 30,000 and traffic to more than 20 million monthly page views. Jason also served as producer for QuinStreet’s WorldWideLearn, where he doubled traffic within one year, and technical producer at CNET’s Shopper.com. Jason holds a B.S. in Chemical Engineering from Stanford University.