Order Up! Serving Up Targeted Banners

Some of you have web sites whose hearts and souls depend on ad revenue. Other site managers are moving away from advertising as a sole source of revenue. Then, there are other folks out there thinking about selling advertising on your site. Web advertising just ain’t as simple as it used to be.

Web banner advertising rates decreased 6 percent from 1997 to 1998, according to a recent AdKnowledge report. The average web banner is currently priced at $35.13 CPM (cost per thousand), and there is pressure from big advertisers to bring web ad costs in line with other advertising methods such as television. With a significant share of advertising inventory left unsold on many sites, the downward spiral of the web CPM, and meager click-throughs (which in most cases are less than 1 percent), the ad game definitely has its challenges.

If your site is highly dependent on revenue, then the decline in the average web banner price can be downright scary. The number of sites selling advertising grew 38 percent in 1998, according to AdKnowledge, so there is even more competition for the online audience. Plus, advertisers are becoming increasingly interested in targeting and tracking click-throughs well beyond the banner, thus raising the banner ad bar for ad-supported web sites.

If you think the history of web advertising has been interesting, just think of the excitement that’s still to come! In order to buck the commodity trend of banner ads and sell more advertising on your site, you need to consider other advertising models, especially ones based on profile-based targeting.

Let’s polish up the crystal ball and take a look into the future of targeted web advertising .

Current Ad Targeting Models

We marketers have been successful in leveraging the targeting capabilities of the web. So much so that targeting can leave a lot of banner ad inventory unsold. Advertisers gravitate to targeted advertising using certain keywords or sections of site with attractive demographics.

Overall, current web targeting is highly content-oriented. According to a recent Wall Street Journal article, certain portions of the Lycos web site are very popular — careers and computers, specifically — because of their demographics. The downside is that other sections of the web site go largely unsold.

There is some user-based targeting using demographics and some user profiling, but it only scratches the surface of the ad targeting opportunity. For example, you are surfing one of the popular sites and you end up in the computer section. More times than not, you will see banner ads related to computer products and services — served up as a result of where you are, but not from any particular insight into your needs.

The same goes for keyword-based targeting. My needs for computers are different than my mom’s needs. I have a laptop, and I have a lot of business-related software. My mom has a desktop computer that has a lot of games! Evidence that no two computer users are the same.

As advertisers seek more than just click-throughs, more advanced targeting techniques will be demanded of the folks hawking banner advertising. So how can an ad-supported web site sell more advertising across their entire site? Consider a user-centric model instead of a content-centric model to target ads.

Moving to a User-Centric Model

There is an advertising technology out there that has not yet been fully leveraged, and that is profile-based ad targeting. The basic premise of profile-based targeting is to deliver targeted advertising to each user based on his or her unique profile, no matter where they are located within your site.

There is nothing like this in the real, offline world. Imagine driving in your car and the roadside billboard ads change as you drive by, presenting advertisements just for you. The web can really approach marketing in a whole new way!

This profile-based ad model could help you sell unused inventory in other sections of your web site, at prices above what is typically charged for less-popular web banners, or about half the CPM. Basically, targeting can lift your CPM in sections that may not have quite the demographic zing.

Here’s how it works: A web site serves up targeted ads based on the user’s profile as they move through a site. In other words, the user who is interested in golfing is served a banner ad in a section of your web site that isn’t necessarily related to golf at all, but is based instead on a databased profile that indicates an interest in golf.

The result is that within parts of your web site that have been less popular with advertisers, you can now sell targeted ads at higher CPMs than you have been charging previously.

Of course, building user profiles takes time and money. However, the long-term payoff can be significantly more that selling more general, run-of-site advertising — especially with banner CPMs continuing their downhill slide.

By the way, profile-based targeting can move you closer to other emerging online marketing models, including direct email marketing and integration with offline marketing. Since you have invested in developing user profiles over time, you will really know who your customers are and how you can leverage that valuable asset in other ways beyond the eyeball.

Next Week: An in-depth look at the two primary data sources for targeting: user declaration and user behavior.

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