Click-Throughs, Advertising, and Branding Versus Point-of-Sale

For anyone trying to make a living at blogging, including our Seed Media Overlords, one of the major hurdles is the poor pay of internet advertising compared to magazine and newspaper advertising. This is an accurate assessment of the problem (italics mine):

I think the evidence for this dynamic is weaker than a lot of people suspect. As far as I can tell, it's all based on Google. GOOG showed up and provided contextualized ads to consumers and a model that allowed advertisers to only pay for purchases that were "working". This is pretty much the only way they make money, and they make a lot of it.

But Google's a huge success in a landscape of failure. Online ads sell for pathetic rates relative to broadcast or print. This is because by all accounts online advertising doesn't work very well. You can measure whether someone clicks on an ad, and often whether they buy something after that click. But it turns out they rarely do those things. So businesses aren't willing to pay very much for ad space on websites.

Is it really a coincidence that the advertising medium with the best instrumentation also appears to be the least effective? I suspect it's not. It may be that ads never worked as well as the industry had told us; or it may be that the eyeballs/clicks/conversions funnel is a naive conceptualization of how the system works. Either way, Google has succeeded by giving advertisers what they think they want, which is analytic tools that seem to reveal that the whole enterprise is horribly ineffective.

I want to return to the "naive conceptualization" part in a bit, but, first, Matthew Yglesias describes the economic frustration stemming from this phenomenon:

To those of us on the editorial side of online media this is a very frustrating dynamic. It's hard to make money writing online because the advertising rates are pathetic compared to what was historically available in print. And the rates are pathetic because the utilization rates are pathetic. But what kind of click-throughs did those glossy magazine ads get? Something here doesn't add up.

The reason "something here doesn't add up" is due to a naive conceptualization about advertising strategies, although it's not clear whether it's print or the internet which is being naive. Print advertising primarily exists for branding. Consider a Neiman Marcus magazine ad. The model is wearing thousands--many thousands--of clothes and accessories. I don't think Neiman Marcus believes for a moment that the ad will convince people to buy that exact outfit. Even someone willing to spend that much money probably won't buy the exact same items displayed in the ad. The ad's purpose is: "If you want primo stuff that everyone knows you spent a ton of money on, visit Neiman Marcus" (even if most people never spend as much as shown in the ad).

The point is the ad exists to define the company in consumers' minds. It's not about click-throughs, but eyeballs that could hit the page. Whether that's a good use of Neiman Marcus' money is a separate issue, but that's the goal.

Contrast that with your typical Internet sidebar ad. Often, there's a very specific product being sold: those ridiculous ripped abdominals or penis elongation ads. Somehow, I don't think branding is operating here; this is point-of-sale advertising. Though I would love to see a "Think Schlong for all your grow-your-penis-four-inches needs" strategy for the comedic value alone.

Obviously, this is a bit of a strawman. Large corporations use the internet to get 'eyeballs', and print does have point-of-sale type ads, such as the stuff often found in the back of magazines. Typically, point-of-sale stuff in print doesn't charge the ad rates that the full and half page stuff does Here too, companies will attempt to determine if these ads worked by asking customers who called to order something--just like the Internet. There's also a psychological component: because internet ads aren't seen as prestigious branding opportunities (Grow that penis!), the prices aren't nearly as high, as is the case with the back of the magazine ads.

It seems to me that, if Internet publishing is to be lucrative, it has to figure out how to viewed as an effective branding tool as opposed to a point-of-sale mechanism.

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Excellent, and exactly dead on.

For a while I was the editor of a monthly rag with a narrow readership (think "trade magazine" though it wasn't) and I did have to get involved in selling ads. Our ad buyers were not selling ads to sell products, or even, really, branding of the first order but rather, as a matter of community membership. Retail outlets of a certain category kinda had to be in our monthly to be seen as participants (that IS branding, but a specific type). We socially blackmailed them into being part of the community by putting ads for all the members of the retail community in the rag for free, then hawking on that basis .. ".. see, you're in this month and next month for free. We felt it important that you be represented here, and we're just starting up so charging you isn't fair. We'll talk later... " then two months later "... so, notice that everybody reads our rag, and look at who's advertising in it! ...."

And then they started paying. At no point did anyone think people were discovering the retail outlets or products because of us, but they had status.

Good analysis. So, are there any websites dedicated to web advertising where web site designers and operators can advertise about their readership? Back when radio advertising was a new, untested idea, you saw lots of ads for advertising on radio in business magazines. As internet advertising matures, we'll probably see more of this infrastructure, and as sites and networks of sites are established, we'll start seeing image advertising.