Online Advertising Pushes Through

APRIL 8, 2009

The recession slows, but does not stop, online ad growth.

As strange as it may sound, the economic downturn may speed up the transition to digital advertising for many marketers.

The Internet’s share of total media ad spending is rising by at least 1 percentage point every year. Simply put: Marketers are spending more on Internet ads, while spending less on advertising in other media, such as newspapers, radio and magazines.

Furthermore, eMarketer projects that the online share of ad dollars will continue to grow, rising from nearly 10% this year to slightly more than 15% in 2013.

“The spending shifts predate the recession,” says David Hallerman, eMarketer senior analyst and author of the new report, US Advertising Spending: The New Reality. “But the current economy is reinforcing the new advertising models—and making them more permanent.”

Does this make sense in light of the fact that the rate of growth for even Internet ad spending is slowing? Mr. Hallerman thinks it does.

“Digital marketing offers compelling benefits, especially for cash-conscious companies,” he says. “Marketers can more readily measure the results of Internet advertising than with most traditional media. This produces more-efficient advertising and higher ROI, which in turn pushes traditional media to compete with lower pricing.”

Which puts more pressure on traditional media’s bottom line.

“At the same time, successful Internet advertising creates a new paradigm for marketing on other media,” adds Mr. Hallerman. “Search is the prime example of the new model.”

When marketers link ads to an individual’s stated interest at the precise moment that interest is expressed—as happens with a search query—relevance breaks down the usual resistance.

“Advertising that consumers welcome is the new reality,” says Mr. Hallerman, “combining effectiveness with efficiency for marketers.”

And in the not-so-long run, that’s where the money will go.

Coupons.com Sees 192% Increase Over Last Year

Consumers Print Out $57 Million Worth in March; Cereal, Baby Products Top List

By Emily Bryson York

Published: April 07, 2009

CHICAGO (AdAge.com) -- One area where consumers aren't cutting back: coupon usage. Coupons.com reported a 192% increase in the value of coupons printed from its site in March, compared with a year ago. The total value of the coupons was $57 million.

Coupons.com had 6.6 million unique visitors this February, up 29% from 5 million the year before.

"Consumers printed a record amount of savings in March, almost tripling the amount printed last year," Coupons CEO Steven R. Boal said in a statement. "Consumers are using digital coupons to save on virtually everything they spend money on, from food to household essentials to entertainment items. We see no slowdown in sight."

Coupons have been the second-most-visited category on the internet -- behind jobs -- for about a year, said ComScore spokesman Andrew Lippsman. Coupon sites had 28 million unique visitors in February, up 41% from the year before, when they drew 20 million. Coupons.com had the biggest share of the category, with 6.6 million unique visitors, up 29% from 5 million the year before. Eversave.com came in second, with 5.5 million unique visitors in February.

In general, consumers seem to veer toward necessities at Coupons.com. Ready-to-eat cereal was the most popular category for coupon usage, followed by baby products and baking ingredients. Diet aids and yogurt rounded out the top five. Laundry supplies and personal care entered the top 10 in March, while salty and portable snacks fell off the list, after ranking in the top five in February.

Online coupon usage has grown dramatically in the past year and in direct opposition to the faltering economy. Mr. Boal said his business has been growing about 25% every month since the recession began. It's helped that major marketers have pulled spending from newspapers as local papers continue to fold. The company's clients include Johnson & Johnson, General Mills, Kimberly-Clark, Kraft Foods, Clorox, Kroger, Safeway, CVS and Kmart.

A Pricing Revolution Looms in Online Advertising

Demographic profiling and behavioral targeting by such companies as Google, Quantcast, and ValueClick is slashing ad costs and threatening Web publishers

http://www.businessweek.com/technology/content/apr2009/tc2009045_367596.htm

By Ben Kunz

Look just to the right of this article. There, on your computer screen, lies a little, two-dimensional secret that will soon threaten major online publishers and their precious advertising revenue.

It's called the banner ad, and its cost may plummet.

For a decade, Web site publishers have relied on an old advertising model: Publishers provided advertisers access to readers, and the more desirable those readers, the more an online publisher could charge. WSJ.com, for example, charges advertisers as much as $64.60 to show a banner ad to 1,000 viewers. (In advertising language, this is called CPM, or cost per thousand impressions.) In the past these fees made sense because The Wall Street Journal's readers are highly affluent, a perfect target for many upscale brands. The better the audience, the more advertisers are willing to pay for ad space.

But what if marketers could find new ways to reach the same audience—with ads on sites that won't charge nearly as much? What if those other ads cost as much as 95% less?

Profiling and Targeting Site Visitors

Online publishers face a big revenue squeeze as companies become more sophisticated in their ability to determine who is visiting what Web sites and when—just as marketers look to squeeze more from dwindling ad budgets.

The old online ad model is getting turned on its ear by such firms as ComScore (SCOR) and Quantcast. These and other upstarts specialize in such methods as so-called demographic profiling, which pinpoints the types of people visiting each Web site, and behavioral targeting, which helps advertisers reach a desired audience based on a person's past Web-surfing behavior.

Marketers can use these tools to reduce online ad costs dramatically. Say your company sells "Bidgets," a luxury product. Ordinarily you'd run banner ads on FancyOldSite.com, which reaches your target audience of men and women who earn more than $150,000 a year. The ads are expensive—say $60 per thousand impressions—but they reach your ideal audience.

You might instead embed a snippet of code in the banners that run on FancyOldSite.com. This places so-called cookies on the computers of everyone who sees the ad so you can track them when they visit other Web sites. That's where retargeting kicks in. Every time a former FancyOldSite.com reader who saw your ad visits other Web sites, your Bidget banner ads pop up again. The banner ads reappear because the cookie on that computer flags a retargeting "network" of thousands of sites, saying "This desirable reader is back." These new ads are cheap—$3 CPM—but they reach exactly the same audience.

Here Comes Google, via DoubleClick

Congratulations! You just used behavioral targeting to reduce your ad costs from $60 to $3 CPM, a 95% savings. (And yes, those cost quotes are based on real client experience.) Online targeting of individuals has been around for more than a decade, notes John Ardis, vice-president for corporate strategy at ValueClick (VCLK), another firm that specializes in online advertising. But interest has surged during the recession. "Obviously today's economy has advertisers looking to do more and more efficient things," he says. Not only are costs lower; results are often better. ValueClick, which provides retargeting, says click-through rates on such ads are 110% to 840% higher than average because they reach an audience more likely to be interested in a product or service.

Google (GOOG) is using its $3.2 billion acquisition of DoubleClick to get into the behavioral targeting game, using the data it monitors from millions of Web users to place more relevant ads. The size of the prize is significant; today Google has less than a 2% share of the $8 billion U.S. market for online display advertising, compared with its 63% share of the U.S. search market.

Quantcast is breaking some of the most interesting new ground in consumer targeting. Several services such as ComScore estimate Web audience demographics by using panels, or small, representative groups of people who agree to have their behavior tracked. Quantcast, however, makes 6 billion direct observations a day from cookies on computers that track the media habits of more than 900 million people worldwide. Quantcast then uses mathematical models to track the paths of consumers through millions of Web sites to determine, for instance, if you are a man age 35 to 44 with more than $100,000 in household income. The data is not individually identifiable—neither your name nor your address are collected—but the sheer size of the data set lets advertisers know exactly what type of people visit each Web site. This approach is relatively new. Quantcast launched its directly measured data service in 2006 and has been rapidly expanding it to new publishers.

And that's the rub. If you, an advertiser, know every Web site visited by your most desirable audience, you can find many ways to reach them other than through such marquee Web sites as WSJ.com (NWS), BusinessWeek.com (MHP), or that of The New York Times (NYT)—especially if the cost is lower. "Why would I pay $60 if I can pay $4?" asks Ardis of ValueClick. "There is really going to be a backlash. Newspapers felt it. Magazines felt it. There is a reckoning coming in online channels, too."

Publishers Can Use Data to Fight Back

But online publications don't have to go the way of newspapers—if they, too, learn to use the new customer data. "It will give them new and more innovative ways to sell the audience," says Quantcast Chief Marketing Officer Adam Gerber. Consider a site whose visitors are 80% male. In the past, that site may have attracted only advertisers who wish to reach men, leaving some inventory unsold. But with better data about readers, the site can now sell to a new set of advertisers the 20% of its space that attracts women.

Christine Peterson, president of 212, New York's Interactive Advertising Club, agrees that publishers can defend themselves. For example, they could charge an advertiser a premium if they can predict that readers are in the market for that advertiser's services. "Just because I looked at a financial page doesn't mean I'm ready to hear from Charles Schwab (SCHW)," she says. "But if I've been back and forth to multiple financial pages in recent days, could they charge Charles Schwab more? Yes."

The new, behavioral-targeted data could spur demand for online advertising. "We had a marketer who was launching a low-carb bread when Atkins and the South Beach diets were all the rage," Ardis notes. "They were targeting women—but it turned out a huge portion of those who signed up were men in their 40s who were starting to develop a little paunch." The advertiser started to spend more on advertising to reach the newly discovered male audience, he says.

So hope remains for online publishers: Find unsold segments of your readers and sell them to advertisers that previously couldn't access them. Use data on past reader "click streams" from other Web sites to help advertisers reach the consumers who are most interested in their products.

Publishers, your audience data is waiting. Advertisers want it. But you'd better hurry, because the price of your old online business model is falling fast.

What CMOs Are Saying: Part III

APRIL 6, 2009

Marketing dollars get tight, but don’t disappear.

A number of reports, and many media articles, say the sky is falling on marketers—and ad dollars are evaporating.

The annual “Marketing Outlook” study, from the CMO Council, doesn’t agree.

Following What Are CMOs Thinking? and More About What CMOs Are Thinking, this, a third survey of CMOs, found that, despite the economy, marketers see budgets holding up fairly well and tightly controlled dollars going to growing and retaining market share.

But isn’t that where marketing dollars always go?

Yes, but as the report states: “Marketing, we are happy to report, is not running scared from the economy by slashing budgets and headcount. Instead, marketing is getting back to our key function: driving business and opportunity to sales and owning the customer experience.”

The pressure is on, however, for marketers to contribute to the bottom line. Management is demanding that marketers grow market share and improve operational efficiencies. Read: more accountability.

That is probably why Website development and digital marketing topped the list of agency changes for 2009.

“Digital marketing has moved well beyond search as social media and experiential marketing continue to grow and evolve,” said Dave Couture of Deloitte Consulting LLP, one of the sponsors of the report. “Savvy marketers are applying collaboration marketing methods as a central component of their efforts to maximize customer lifetime value in the digital economy.”

One-half of the global marketers surveyed claimed they were either holding firm on budgets or anticipating increases. Nearly one-third planned small budget increases, and 8% expected increases of more than 10%.

On the other hand, nearly one-half said they would decrease spending, with 19% expecting cuts of more than 15%.

In fact, when asked pointedly how economic conditions were influencing their budgets, 34% of the marketers said they were sharpening focus and reducing spending.

As noted above, however, not everyone shares the relatively rosy outlook of the marketers surveyed by the CMO Council.

In an article in Brandweek, Marc Babej of the marketing consultancy Reason inc. said, “Marketing budgets in many, if not most categories, are subject to cuts and in many cases they are deep cuts. That’s just the reality. Marketing positions are being cut too, absolutely.”

He believes that many marketers are simply “putting on a brave face.”

The Big Money: Anatomy of a Web Advertising Scam (Trip Foster/Advaliant Quoted)

http://tbm.thebigmoney.com/print/1733

The Anatomy of a Web Advertising Scam

By chadwick.matlin

Created 04/02/2009 - 6:31pm

The Internet wants me to have a flat stomach—and it wants me to have it for free. Over the last few months, those flat stomach ads [1] have followed me around the Internet like a beggar asking for money. On many of my favorite Web sites (including the ones I work for), high-class Internet advertising has been replaced by these low-budget pictures promising a better physical and superficial life.

The ads plead: Wouldn’t I like to click and read a flat-stomach testimonial? And from there, wouldn’t I like to click to see a product that could help me get that flat stomach without even trying? And from there, wouldn’t I like to order that product for free? And wouldn’t I like to give them my credit card info? And wouldn’t I like to investigate a mysterious charge on my credit card bill 30 days after I subscribe to my free product? And wouldn’t I like to hold for two hours [2] while I try to cancel my account after I realize I’ve been had?

Such is the world of flat-stomach advertising. But it’s also the world of stretch mark ads [3], and white teeth ads [4], and government grant ads [5], and get-paid-to-search-Google ads [6]. There are handfuls of these get-beautiful/healthy/rich-quick schemes floating around the Internet, and all their advertising structures behave the same way: Some sketchy ad leads you to some sketchy testimonial page, which then leads you to the sketchy product itself. When you order the product, the vendor doesn’t always make clear that you’re signing up for a free trial, and when that’s over you’ll be charged up to $90 every month until you find a way to cancel. There isn’t much information about why all of these scams operate in the same way, even though this kind of Web advertising is quite prevalent. TBM felt it was time to investigate. The scams are so successful because they’ve created an extremely efficient sales model—for everybody but the consumer. That paradox makes it worth exploring the seedy underbelly of the Web advertising industry. Consider this a TBM public service announcement about the people who make all of this scum possible in the first place.

The Scammer

When tracking the major players in these scams, it’s best to start at the start. At the root you have the vendor: an organization that wants to sell its product and wants help getting it in front of as many people as possible. If the vendor is a shady dealer, either ad networks (Google Adwords [7], Microsoft adCenter [8], Yahoo Publisher [9], etc.) will reject them straightaway, or they’ll quickly be reported as potentially fraudulent. So they need to figure out a better way to get their product in front of the desperate masses.

Unable to advertise for themselves, the vendors turn to mercenaries to help spread the word. The vendor creates something called an affiliate program that gives individuals money every time somebody they refer to the vendor’s site buys the vendor’s product. They’re the ones who are seeding the ubiquitous advertisements for flat stomachs. The affiliates in question don’t care that they’re advertising a scam, because they’re still going to get paid regardless. And payday is quite good—folks on the Internet claim to bring in more than $10,000 a month once they get the hang of being an affiliate. It’s a time-honored element of salesmanship: He who brings in a sale gets a commission—no matter the customer’s ultimate satisfaction with the product.

For example, the flat-stomach ads are primarily a front for acai berry [10] scams. The acai berry is especially popular thanks to endorsements from Oprah and Rachael Ray, so scammers are feasting on its potential. It’s gotten so out of hand that Connecticut’s attorney general is expressing outrage over the acai scams [11]. Some acai berry vendors are legitimate, but they’re crowded out of the marketplace by all of the scammers who are willing to pay high commissions to their affiliates.

I should note that affiliate programs are not, by definition, scams. The most established is Amazon’s, which pays sites a commission for referrals that turn into sales. (Both The Big Money and Slate are affiliates.) The affiliate programs are tainted only when the end program is a bad seed.

The Middleman

Now that the affiliate program has been created, the scamming vendor still has a problem of outreach. Few will know it has an affiliate program, since few know the site exists in the first place. And thus, as happens in every efficient market, a middleman enters the fray.

Here, the middleman is called an affiliate network, and they’re basically the equivalent of temp agencies. They have job boards that wannabe affiliates can peruse. So anybody interested in linking to acai berry products can find all the acai vendors on the job board. When an affiliate signs up via the network, the network is entitled to a cut of the commission. Everybody wins! Except, of course, the scammed consumer.

As middlemen, affiliate networks are uniquely positioned to cut off the scams from reaching wide audiences. Within the industry, there’s a split taking place. In one corner, there are those who want to elevate the craft to be a more professional environment. But on the other side are networks willing to lend their services to any cause. It’s usually easier to peddle scams than accountability. Trip Foster, chief marketing officer for affiliate network Advaliant [12], told The Big Money that the space is so unregulated that the tainted networks can get away with peddling bad products. Advaliant screens its vendors and affiliates to weed out the scammers, he said, but that doesn’t mean everybody will.

The Mercenary

When an affiliate advertises for a scam, he has two options. He can buy advertising that links straight to the scam vendor’s page (with his affiliate code embedded in the link so he gets a commission if there’s a purchase). But, as we’ve discussed, that method isn’t always best because those pages often get stripped from ad networks.

So instead, they create a landing page. The idea is to create an interstitial page that hypes up the product so that readers are likely to both click through to the product page and buy it once they’re there. The pages usually appear as first-person blogs that have a picture of the author with a short bio and a testimonial about how great the product is. See Jacky [13]’s, Monica [14]’s, and Ellie [15]’s weight loss blogs, all of which feature the same woman’s picture (illegally pulled from iStockphoto [16]) and all of which link to different weight loss products.

Creating one of these landing pages can take seconds. All you have to do is take somebody else’s landing page, copy the HTML, and make a few superficial changes to personalize the site. (As I’ve written about before, the stimulus scams seem to have an especially prevalent copy-cat culture [5].) There are even sample landing pages [17] (.zip file) to download on the Internet for those who really want to poach. Of course, nobody can get that upset about landing page theft, since the scam-riddled portion of the industry is based off of deception in the first place. If a landing page isn’t a first-person testimonial, it can be a review site that touts the vendor’s (or multiple vendors’) product as the best [18], with a link to the page where it can be purchased. Often these sites will say they’re sifting the scams from the legitimate sites, when they’re doing exactly the opposite. How convenient.

The audience

By now, the trap has been set. To entice consumers into the landing pages, the affiliates buy up advertising in a variety of venues, namely search engine, social media, and third-party ad networks. The ad networks will take in the scammy ads because they can’t screen them all ahead of time, and—thanks to the landing pages—they appear to lead to legitimate sites. Google told TBM that they rely on users to report abuses, since they can’t screen all of the ads in their Adwords network [7]. Other networks have the same problem—the scam-fronts are bidding high prices at the ad auctions, so it pays not to check into them too deeply. Facebook is especially egregious [19]. The affiliates keep track of which ads and landing pages are performing the best (offering the most commissions) through free tools like Prosper202 [20].

Once they’re in the networks, they’re served across the Internet. The search engines will serve the ads on keywords that the affiliates have purchased. The social media sites will serve them based on the demographic data in your profile. And the third-party ad networks will pump them into websites that use their service. This last scenario is why you see the ads pop up on sites like Slate, The Big Money, and other news publications. Most sites use ad networks when they run out of ad inventory they’ve sold themselves. So when advertising is light—as it is in the recession—these ad networks are relied on more heavily. Thus the increase of the scam ads in recent months.

From there, of course, people click on the ads to the landing pages to the vendor pages. Then, when somebody buys the vendor’s product, the money flows through the system, allowing more ads to be bought and more commissions to be paid out.

In a way, it’s a beautiful system. Everybody is intertwined, everybody relies on one another. Its interactions almost seem ecological, as though they’re a food chain contributing to a broader ecosystem. Just don’t call it the circle of life—it’s more like a circle of lies.

***

This piece owes a large bit of thanks to Nickycakes.com [21], which has a vulgar but indispensible guide to affiliate advertising [22]. Also, the Waffles at Noon blog [23] is ace at keeping track of all the various scams and landing pages [24]. E-mail me [25] if you’ve seen this kind of multilevel marketing scam for other products than those mentioned.

• Press Page
• • About Us
• • Advertising
• • Our Partners
• • Sitemap

• User Agreement and Privacy Policy
• • User Submission and Message Board Guidelines

© 2008-2009 Washington Post.Newsweek Interactive • All rights reserved.

---

Source URL: http://tbm.thebigmoney.com/articles/0s-1s-and-s/2009/04/02/anatomy-web-advertising-scam

Links:
[1] http://wilmens.net/blogs/wp-content/uploads/2009/01/screenshot.png
[2] http://www.ripoffreport.com/reports/0/372/RipOff0372878.htm
[3] http://wafflesatnoon.com/2009/02/16/the-newest-phony-blog-stretch-marks/
[4] http://maryswhiteteeth.com/?t202id=987&t202kw=white teeth
[5] http://www.thebigmoney.com/articles/0s-1s-and-s/2009/02/25/get-your-not-so-free-grant-money
[6] http://google-cash-system.com/gms.php?t202id=8259&t202kw=google money&gclid=CJnc-a2I05kCFRMhnAodegzFug
[7] https://www.google.com/accounts/ServiceLogin?service=adwords&hl=en-US&ltmpl=adwords&passive=true&ifr=false&alwf=true&continue=https://adwords.google.com/select/gaiaauth?apt=None&ugl=true
[8] https://adcenter.microsoft.com/
[9] http://publisher.yahoo.com/
[10] http://en.wikipedia.org/wiki/Açaí_Palm
[11] http://abcnews.go.com/print?id=7132495
[12] http://www.advaliant.com/
[13] http://jackysdietblog.com/
[14] http://www.monicasdietblog.com/
[15] http://elliesweightloss.com/
[16] http://www.istockphoto.com/file_search.php?action=Browse&Cache=8ae59014f78474ba7b757faa9b370727&page=1
[17] http://www.nickycakes.com/wp-content/uploads/2009/02/free_acai.zip
[18] http://www.acaireviewed.org/
[19] http://wafflesatnoon.com/2009/03/01/what-is-facebook-thinking/#more-535
[20] http://prosper202.com/apps/
[21] http://www.nickycakes.com/
[22] http://www.nickycakes.com/newbie-guide/
[23] http://wafflesatnoon.com/
[24] http://wafflesatnoon.com/2009/01/20/the-fake-diet-girls/
[25] mailto:chadwick.matlin tbm@gmail.com

Easter Sales Dropping, Not Hopping

APRIL 3, 2009

Finding sales tougher for retailers this holiday.

Easter baskets may still be colorful, but they won’t be as full this year. The economy is forcing even the Easter Bunny to cut back on traditional holiday candy, gifts and new spring outfits.

According to the “2009 Easter Consumer Intentions and Actions Survey” from the National Retail Federation (NRF), conducted by BIGresearch, US consumers will spend an average of $116.59 on Easter candy, gifts, food and decorations. That is down from $135.03 in 2008.

NRF estimates that total US spending on the holiday will be $12.73 billion.

The largest expense this year will be Easter dinner, with the average person spending $37.67 on food, a figure that is down from $41.09 last year.

Spending is off across the board. Gift spending will drop from $21.42 in 2008 to $17.30 this year, flowers will droop from $9.11 to $7.55 and candy will crumble from $18.12 to $16.55.

Spending on spring attire is also down—despite the fact that Easter falls three weeks later than it did in 2008. On average, consumers in the survey said they would spend only $19.44 on clothing, down from $23.82 last year.

As befitting the season, though, hope springs eternal.

“Retailers are hopeful that a late Easter will bring warmer weather and put shoppers in the mood to buy clothing, flowers and other holiday gifts,” said NRF CEO Tracy Mullin.

Not surprisingly, the survey found the majority of people (64%) will shop at discount stores this year, and that is up from the 59% who discount-shopped last year.

Approximately one-third of shoppers will go to department stores for Easter merchandise and nearly one in four will visit a specialty store.

Only 11% of Easter shoppers expect to buy online.

The NRF figures are backed up by an industry survey from IBISWorld, which showed Easter holiday expenditures declining 8%.

The firm estimates that total sales from Easter clothing, candy, flowers, decorations, food and greeting cards will fall from $14.8 billion in 2008 to $13.6 in 2009.

eMarketer’s Online Ad Spending Forecast

APRIL 1, 2009

Recession-proof no more.

On Monday the Interactive Advertising Bureau (IAB) released its online advertising spending numbers for 2008.

For an advertising channel that many pundits had claimed—unlike its traditional counterparts, such as newspapers, magazines and television—was immune to the effects of the economic slowdown, the figures were not good news.

After years of soaring growth, online advertisers have started pumping the brakes.

The IAB report, based on a study conducted by PricewaterhouseCoopers (PwC), showed that online advertising growth was cut in half last year. US online advertising revenues grew only 11% in 2008 to $23.4 billion—the slowest rate of growth since 2002.

Moreover, the road ahead will be even slower.

According to eMarketer’s revised projections, released today, the rate of US online ad spending growth will halve again in 2009, falling to 4.5%.

As a result, eMarketer projects that in 2009 online ad spending will reach only $24.5 billion.

Previously, eMarketer had predicted an increase of 8.9% for 2009, with online ad spending reaching $25.7 billion.

David Hallerman, eMarketer senior analyst, does not look at the figures and see a glass half empty, however.

“Particularly in this economy, it has to be considered good times when US online ad spending reaches record highs,” says Mr. Hallerman, “as it did in Q4 2008 at $6.1 billion and as it will in 2009, at $24.5 billion.”

“Now that we've entered into the depths of the current recession, the Internet is emerging as one of the only bright spots in an otherwise decimated media landscape,” adds Geoff Ramsey, eMarketer CEO.

“It is true that the growth rate for interactive has slowed over the past 12 months, but marketers are continuing to migrate a greater percentage of their precious ad dollars toward the digital channel.”