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Clickstream Data Warehousing Companion website for the book by Mark Sweiger, Mark Madsen, Jimmy Langston, and Howard Lombard Published by John Wiley & Sons, January 2002 |
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| Banner Ads: Easy Money or Pandora’s Box? |
| By Mark Sweiger, President and Principal, Clickstream Consulting This is the fourth in a series of articles that focus on the application of clickstream data warehouse technology to an e-business environment. In this installment we examine the surprising nature of the online advertising environment, demonstrating why you need a clickstream data warehouse to measure and guide your e-advertising business strategy. Most of us are the children of our own marketing-oriented culture, growing up under the constant bombardment of advertising. As a result, there is a tendency to become very blasé about advertising, having already experienced every possible modern marketing ploy from magazine ads to infomercials. Then along comes the Web, with its ubiquitous banner ads, and it seems to be more of the same. But that humdrum veneer is nothing but clever camouflage for an advertising medium that is like no other. Let’s investigate. The most basic type of web advertising model is the banner ad. An e-business is either a producer of banner ads or a displayer of them, often both. The producers (the advertisers) pay money to have their ads placed on displayer sites. But on the Web, advertisers do not typically contract directly with the displayer sites; instead they contract with a Web advertising network intermediary to display ads at sites that have user activity that shows affinity for their particular type of advertising. DoubleClick is the largest such network, but there are many others including Avenue A, Engage/Flycast, 24/7 Media, etc. Many sites are built with at least one spot on every page for a banner ad. These sites shop around for advertising networks that will pay them the highest rates to fill the banner ad holes with their pages. Payment rates generally rise as a function of increasing site traffic. A large percentage of these sites have business models that are almost totally driven the by banner advertising revenue. Take Yahoo as an example. They use their content to get the users to view their pages, and then advertising networks fill the holes with the appropriate banner ads. Every time an ad network fills one of the banner ad holes on a page, Yahoo is paid anywhere from a penny to some larger fraction of a dollar. If the ad generates a clickthrough, they are paid even more. With the total number of Yahoo page views currently pushing toward the billion-a-month mark, Yahoo makes some serious money off of banner ads, even if an individual banner ad view only nets them a small fraction of a dollar. If you display banner ads on your site, you can think of it as having billboard space inside your place of business, where the content is constantly changing and you get paid for each billboard re-paint. This may seem like easy money, but this is not the whole story. First, you have to ask yourself, “What do site users do when they click on a banner ad?” The answer is, they leave your site and go somewhere else, perhaps never to return. Yes, you got paid even more for the clickthrough, but the user is now gone. If your site is a store, he was just whisked out of the store, perhaps before he could buy anything there. This ad-induced “wandering eyeballs” problem may cause more of a site revenue drain than the resulting ad revenue generates, making banner ads a Faustian bargain. Worse yet, unless you pay for advertising network restrictions by accepting significantly lower banner display rates, the advertising networks will happily display ads for your direct competitors on your website. From an advertiser targeting perspective, this makes perfect sense. If I am at Kmart’s Bluelight.com site, I am an ideal prospect for a banner ad that takes me to Walmart.com, Target.com or Amazon.com. But would a brick-and-mortar Kmart store permit eye-catching ads for Walmart within its premises? Absolutely not. Yet this is exactly what banner ads do in the equivalent Internet environment. You have to ask yourself if this is a revenue strategy that makes business sense, or is it just a mechanism to drive business to your competitors, or to make user eyeballs just wander away. Despite these warnings, Internet advertising is generally extremely cost effective, and it can give you much greater insight into the behavior of both your customers and non-customers, something no other advertising medium can provide. But in order to accomplish this, you need a clickstream data warehouse to record and analyze the marketplace behavior, creating an effective Internet advertising process that constantly improves your business performance. The next article begins a series that outlines each of the major components required to build a clickstream data warehouse, starting with a generalized clickstream data warehouse meta-schema. |
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