Contextual Ad Exploitation

    December 21, 2007

As an advertiser and a publisher I have ad CTR data spanning hundreds of millions of impressions and about a million ad clicks across a wide array of verticals.

One of my early opinions on contextual ads and search ads was that people are far more likely to click ads if they are desperate, stupid, or ignorant. While I was flamed for my opinion, this opinion has only been confirmed from talking to friends who have much more data than I do, and Dave Morgan from AOL also confirmed it.

Seth pointed to this post by Danah Boyd, which offers a hypothesis on who is clicking ads:

Based on what I’ve seen qualitatively, my hypothesis would be that heavy ad clickers are:

  • More representative of lower income households than the average user.
  • Less educated than the average user (or from less-educated environments in the case of minors).
  • More likely to live outside of the major metro regions.
  • More likely to be using [social networks] to meet new people than the average user (who is more likely to be using SNSs to maintain connections).

The problem with catering to the lowest common denominator is that the people who are clicking the ads

  • have less of an ability to buy premium products
  • are less likely to do follow on marketing for you to promote your products to other
  • are a small minority of your visitors
  • are driven away from your site when they click
  • each day many ignorant users learn more about the web and click less ads
  • the new users coming on the web replacing those who are learning about it are even poorer and less socially connected than those already on the network

In the next couple years there is going to be a major shift in online ad based business models where many publishers push themselves up the value chain. The trend for profitable publishing, is going to include the following aspects

  • fewer ads
  • ads with more information
  • ads that look more like information
  • ads tighter integrated into the content
  • having a semi-porous brand which allows your free content to do your marketing for your paid content
  • in many case selling ads that include personal endorsement, and ads for white label products or house products (often via subscription)

As more premium publishers shift from ad based models to selling white labeled and house products it is going to get harder to buy ads affordably on the clean parts of the web. And the trend has already started. If you look at some of the most popular investment sites you will see that many of them provide free offers for products that lead you into buying a subscription service.

If you are going to monetize your site from a small minority of your visitors it makes sense to build relationships with them and charge recurring if you can. If your only monetize 5% of your audience would rather have $50 a month from them or 50 cents?