Why (and how) the online ad model needs to change

Somehow I keep expecting some company to break through and solve the problems with the Google AdSense model. As advertisers, buyers and media vehicles get smarter about efficiency, the holes in the system get bigger and bigger.

AdSense revenues help a lot of mid to large-sized web sites, but really more as incremental revenue. By the time you’re big enough for AdSense to support your business there are several other revenue opportunities with larger payouts avaiable to you.

And there’s no doubt that AdSense (and most Internet advertising) is failing to help people find and buy the things that matter to them. How can it be that we have an ad model that is considered wildly successful when a campaign or ad unit gets a click-through rate of 1%? And the reality is that it’s much much worse than that on average.

Photo: DWS

Why are click through rates so low? Because the ads don’t matter to people. They aren’t relevant. They don’t help people identify products or brands that matter to them. They don’t help people locate the right deal at the right time.

Yes, some people get lucky if they’re paying attention. There wouldn’t have been $5B in search ad revenue in the market in 2005 if nobody was clicking on the ads. But the click performance and subsequent conversion rates suggest this kind of ad network is just a spray hose of wasteful bits showering the Internet with clutter.

It doesn’t work for advertisers, either. Advertisers want more control over their ads, where they appear and to whom they are shown. Blanketing text links blindly across the Internet does not necessarily result in paying customers. They know they’re wasting money, but they can’t afford not to be present in the network.

The AdSense model does much more to help Google and the Google shareholders than it does to help any of the customers it is supposed to serve.

I think the Amazon affiliate program is much closer to a more sustainable ad model for the future. When you can track clicks all the way to a sale then everybody wins. The weakest link in the Amazon affiliate chain is the media vehicle which has to work a lot harder to drive clicks that convert to sale. But the buyer and the seller are both happy, and that’s ultimately what matters most.

I’d love to see an ad network that is able to let media vehicles optimize the ad content and display rules for the ads. The look and feel of an ad is not going to crank up the conversion rates. Media vehicles need to help the right ad get to the right person.

For example, when I post on my blog, I should be able to flag a stream of ad content and define the type of algorhythm that makes the most sense for that post and the users who are most likely to read it. This post should probably link to lead generation service providers even though I haven’t explicitly used the term “lead generation” anywhere in the post…uh, well, you get the idea.

Likewise, users should be able to self-identify as buyers. I haven’t yet setup a wifi network in my home, so I’d love for every tech-related web site I visit to show me the latest deals and setup guides and retailers for wifi gear. I’d actually like the content on all those sites to adjust, as well. I want to see what’s new and interesting at these sites, but they should be able to surface content from deep in their archives that is relevant to the things I’m actively pursuing. My intent should edit the home page for me.

I guess I’m saying that somebody needs to build a service that on one side connects directly into an advertiser’s sales conversion or transaction systems and on the other side distributes marketing links and images for media vehicles to take and optimize. The system should track performance across the chain and offer optimization options at all points along that chain.

Pieces of this exist and some of it is very complicated, I know, but I don’t see why efficiencies can’t be improved. And if enough advertisers are able to offer affiliate programs to track impression-to-click-to-sale, then they may even start competing with eachother and offer better incentives to media vehicles that find customers for them.

Users would see ads for things they want to buy. Advertisers would sell more product. And media vehicles would earn more from the revenue share.  Where’s the down-side?

8 thoughts on “Why (and how) the online ad model needs to change”

  1. And if they offered nice adds (choose your color-set-border-picture-etc), all the better. How about being able to ask a brand which you particularly like to advertise a product you like even more on your blog/site? I know nothing about on line ads, I don’t carry them on my blog, but this is what I would like.

  2. I think you may be overestimating the abysmal stats behind conventional advertising. Online, the 1% of people clicking into an advertiser’s site is very good. If, for example, you advertise a website prominently in a print publication you should expect perhaps 1/100th that level of performance (1 in 10,000 readers) clicking to the site.

    Context ads have redefined the relationship between content and advertising, and until a LOT more money flows from absurdly overpriced offline media to online, and thus starts to close the ROI gap, I think it is unreasonable to expect online ad models to change much, although I’d suggest they will tend to move away from PPC and towards pay per action models which make performance measures somewhat more straightforward.

  3. What Joseph said. What advertising are comparing web ads to that has a higher response rate? How many people call the phone number in a TV or print ad when they see it? I’d expect much less than 1 percent. I think you’re being unrealistic to hope for more.

    Only a few of the people reading a blog at any time are going to be interested in buying (or just finding out more about) *any* product being advertised there. That’s just not what they came to your site for. Improved targeting isn’t going to help that much.

  4. Google adsense is contextual ad.. Then we can may be say that of the ad is not “good” and not interesting for the readers, it seems that the CONTENT of the site/blog is not interesting … for the readers ;-))
    A large% of readers come to one site/blog trough search engine (and google for example).. They click on ONE result, come..; and see than the content is not very interesting.. and go back to search ..
    Have a look about the % of readers who stay on your site/blog LESS THAN 5 seconds !! it’s amazing.. Then Google adsnese will have more than 1% when google search will be .. better ;-))

Comments are closed.