You've been hearing the same type of news, quarter after quarter. Internet advertising is growing -- and the companies who are at the forefront of the advertising market are getting richer.
While that's important for the Web companies that are raking in the dough, it's just as important for businesses that want to use the Internet to advertise their products and services.
Companies spent $5.8 billion on Internet advertising during the first half of 2005, according to the Interactive Advertising Bureau, up a whopping 26 percent from the year-ago period. And it's expected to keep rising as more advertisers join the party and existing Internet advertisers learn new ways to take advantage.
Still, the amount being spent on Internet advertising pales in comparison with the $245.5 billion that U.S. companies spent on advertising in all forms of media in 2003. In fact, the Internet advertising sum is roughly comparable to the amount that General Motors and Verizon collectively spent on advertising.
The flip side, of course, is that online advertising is booming while many other forms are not. Newspapers, in particular, saw ad revenue plunge in the 2001 recession and, while up a bit, struggle to recover lost ground. Increasingly, marketers are turning to more targeted methods of reaching their audience, such as popular TV and cable shows and heavily used Web sites.
While there are a number of ways to advertise using the Internet, search engine advertising is among the best known and among the biggest growth segments.
With search engine advertising, an advertiser purchases a keyword from a search engine such as Yahoo! and Google. Then, whenever a user uses that engine to search for that keyword, the purchaser's advertisement shows up on the screen, ready for the searcher to click on. When he clicks, he is taken to the Web site of the advertiser.
The idea is that an advertiser can limit wasted ad spending by homing in on people who are likely buyers -- identifiable because they are searching for keywords that relate to the advertiser's product.
In most cases, buying an online ad is different from buying a search-results listing (the listing of all the results from your keyword or key phrase search). Indeed, Google doesn't even sell its main search-results listings, it sells a separate listing of search results that can be seen on the right of the computer screen, often in a shaded or colored box. Those listings also come up when certain keywords or phrases are entered, but they are sponsored by an advertiser. Click on them, and the reader is taken to the sponsor's Web site. Some search engines mix the ads within the listings; but most reputable search engines show them separately.
With Yahoo!, you can purchase a listing for $300 per year and it will show up in a specific Yahoo! category whenever a Yahoo! user views that category in the Yahoo! directory. The user often doesn't know you have paid for the right to have your listing included.
Other search engines have their own methods for identifying -- or not identifying -- advertisements, which could show up within the main listings or separately, depending on what type of ad you buy, and from whom you buy it.
There are several types of ads that prevail for online advertisers.
Impression ads, also known as CPM (Cost per thousand impressions) ads take their model from traditional advertising in which the publisher or search engine promises that your ad will be seen by a certain number of eyeballs -- and you pay based on the number of people who see it. The thought is that even if you don't get a click on your link the first time the user sees it, you are building brand equity, trust and recognition, so he may be more willing to click next time or at the time that he is more interested in what you have to offer him.
Yahoo! listings are similar to CPM ads in that you pay a set amount for the ad. However, Yahoo! doesn't guarantee a number of impressions. The company doesn't even tell you how many impressions you'll get from your listing. You're paying for the right of inclusion.
Performance deals offer an alternative to traditional CPM purchases. In these buys, the ad purchaser pays the publisher or search engine based on how many people perform some action, such as making a purchase, signing up for information or simply clicking on the link.
The advantage is that you don't pay unless somebody clicks through or performs the action promised. The disadvantage is that if your ad is displayed often and doesn't get clicks, the search engine will give your ad less weight when determining which ad to show -- so it will likely be seen less often.
Depending on where you buy your ad, you might be offered a selection of formats, including text, display, interactive media, sponsorships and e-mail.
According the Interactive Advertising Bureau, CPM ads make up 48 percent of all Internet advertising purchases. Performance deals account for 40 percent, while 12 percent include a combination.
Most search engines offer cost-per-click performance advertising as their main advertising offering. You pay each time somebody clicks on your ad -- not every time your ad is displayed.
Google's advertising product is called AdWords. Using a self-help interface, you create your own text ad, select the keywords with which you want your ad to be associated, and set your payment limit.
Google AdWords ads show up whenever a user searches Google for information, or when he visits thousands of Web sites that have signed on with Google to show advertising for a portion of your fee.
Yahoo! Search Marketing, formerly known as Overture, operates in a similar fashion, although your ad shows up in Alta Vista, CNN.com, InfoSpace and other Web sites instead of Google and its partner Web sites.
Both companies require you to bid to have your advertisement seen when a user searches for specific keywords. The more you bid, the more likely your ad will be seen near the top of the list when those keywords are used.
Microsoft also is entering the market with a product that is expected to be released in the spring of 2006 and will offer advertisers the ability to choose their audience based on geographic, demographic and lifestyle attributes. It also will let companies display their ads on specific days during specific periods. For instance, a restaurant may choose to display ads during the hour before lunch.
America Online also sells millions of impressions to advertising buyers. It has recently started to offer more of its content for free to non-AOL members, thereby creating more opportunities for you to purchase ads from AOL.
(David Radin is a free-lance technology writer for the Post-Gazette. Contact him at www.megabyteminute.com.)
