Tuesday, March 17th, 2009

The problem with AdSense

The problem with AdSense
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For as much as I make fun of them, I’m in fact a believer in online ads. They’re largely a mess right now, but this will change. In contemplating the future, three factors need to be considered: First, AdSense has completely buggered the market. Second, the death of mainstream media will create a vacuum of content. Third, this shortcoming will result in real revenue for quality content providers, regardless of delivery device.

AdSense is fucked

Some of you are put-off by my use of expletives. I apologize for this; nevertheless, such language is well warranted in this instance.

For those of you unfamiliar with AdSense, it (along with AdWords) is Google’s machine for delivering ads. It, like much of what the company does, is really quite brilliant. Using AdSense and AdWords, website owners can (with Google’s help) insert ads in their sites, and subsequently, earn revenues for doing so. Upon its arrival, it was heralded as a godsend, both for simplifying the process and allowing a simple way to connect advertisers with content creators. Since then, it has largely come to dominate online advertising.

The challenges with AdSense are many-fold. First of all, as with anything on the web, there is always a group of people who look to “game the system”. Almost overnight, a raft of “AdSense experts” were selling their own brands of snake oil, promising to help people collect their many millions through the service. Others simply created or copied content, within which they disguised ads, in order to trick viewers into clicking on them.

As a result, site visitors often find themselves duped. Additionally, for content creators unwilling to take such questionable approaches, the revenues from AdSense have become negligible at best. In short, you need to drive huge numbers in order to see any real revenue from the service. Meanwhile, this proliferation of content intent on simply driving ad impressions, lowers the value of online advertising in general.

The end of traditional media

Over the past couple of weeks, we’ve heard a great deal about the plight of traditional media. It seems as though it’s become increasingly improbable for newspapers to remain profitable, and at worst to even stay in business. As a result, even venerable publications like Seattle’s Post Intelligencer are at death’s door.

What I like to remind myself at times like this is that such changes tend to bring new opportunity. Although the delivery device is changing, content is still valuable. The question is how long it will take to see ad spending redistribute in the absence of traditional media sources.

Think of it this way: there’s great inequity for content creators today. While most bloggers make hardly a penny from their writing (outside of ancillary benefits such as good PR), a full page ad in a metro newspaper will set you back $20,000 for a single placement. With readers migrating to the web, and newspapers folding, it’s only a matter of time before those ad dollars shift to the web as well.

We’re all familiar with the obscene costs associated with television advertising at events like the Super Bowl. We accept that multinationals spend hundreds of millions advertising their brands. Heck, we even know that even the most basic regional direct-mail campaign will eat through thousands of dollars.

The fact of the matter is that since we still insist on thinking that the web should be free, advertising in this venue remains immature and undervalued. In part, the problem with this is skewed by the outmoded notion that the delivery device should dictate the cost of the placement, when in fact, it should be the value of the placement and the quality of the content that does so.

The nature of the content should define its value

Now, in order for this to happen, the nature of online advertising has to change radically. First of all, it can’t be based on “tricking” viewers as it currently is. Moreover, we have to start considering the overall value of the ad to the advertiser.

The truth is that advertising (albeit sometimes irritating) is worth something. Additionally, the value of an ad can’t strictly be measured by click-through rates. AdSense rewards those sites that generate millions of page views. As such, a site like I Can Has Cheezburger can do reasonably well from the service; but, ask yourself, do you even momentarily look at one of those ads, which watching those crazy cats? Doubtful.

Clicks are often made accidentally, as many Adwords profiteers have learned. They disguise ads as content, or interrupt the viewer for mind-share. Although this may provide measurable traffic, few would argue that this has any real value to the advertiser. On the flip-side, I’ve only once clicked on a link to the hosting company Media Temple, but their persistent advertising on creative blogs has made me well aware of the brand. This will be important when we soon re-evaluate hosting providers.

Instead of concentrating on sheer volume, we need to look at how we can best connect advertisers with interested parties. ideasonideas for example doesn’t see huge volume, given the rather specific nature of its content; nevertheless, if you need to connect with thinking designers (who are willing to read through these long-assed posts) this is probably a good place to reach them. ideasonideas numbers will never be huge; that doesn’t mean that there isn’t value in advertising to these readers.

So, here’s my suggestion for an alternative (and perhaps more sensible) approach:
1. Independent producers concentrate on creating good content
2. They then limit the number of ads on a page, showcasing only those relevant to readers
3. They sell space directly to advertisers or work collectively as small “narrow” networks

Of course, such a solution would make things far more challenging for media buyers. Still, I think we need to see such a model emerge. AdSense as it stands today really doesn’t benefit anyone. (Aside from Google, and I get the feeling they’re doing okay.)

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Comments & Trackbacks

  1. Zinni says:

    Eric,

    I applaud you for this post, you have stated what I have been trying to for a long time now. I especially feel you on the lower number of ads per page, as I would love to get it down to 1 or 2 total. I have been targeting the same niche or "thinking designers" which has meant traffic levels which are probably on par with what you are seeing.

    I do agree that just because traffic is not huge does not mean that it is not valuable. I think it is just going to take a shift in focus on the part of the media buyers to see that highly targeted is far better than high page view numbers.

    Maybe this just means that sites like our own need to band together and create highly targeted networks to raise our collective pageviews. I am just not sure what kind of system you would use to manage these groups? Adroll.com has attempted to do this but it is far from there. The advertisers are too segmented and the publisher groups are only loosely similar if that.

  2. Immediately we've approached advertising in as simple of a fashion as possible, by just posting some rates here: http://www.ideasonideas.com/advertise and sending out a few emails. It's the "lazy" way to approach, but it certainly beats AdSense. Likewise, we're not really expecting to earn much from it, so this seemed like a reasonable approach.

    We have been toying with starting a network to band together like minded groups, but are still unsure as to whether it warrants the investment. Doing so would be nice as it would bring together a number of similar properties and as such would make the purchase of ads easier for media buyers. That being said, it would take some amount of work to coordinate and sell. Actually, it's the last part that has (to date) scared us off. Sales is an area in which we've been quite weak. (We're good at "making", not bad at marketing, but terrible at the drudgery of sales calls.)

    That being said, I think it's something that we should all keep in mind. Realistically, sites like ideasonideas really aren't about building our core business; in fact, I doubt that any of our clients even read this blog. We make it for our peers, and as such don't really see much (err... any?) monetary reward from it.

    That being said, many groups need to connect with designers. It seems foolish to not earn something from affording advertising opportunities on our sites. (And as noted above, I think this is a pattern we'll see emerge in many unique niches.)

  3. Ted Howard says:

    I could be wrong about this, but I think you just proposed the traditional ad buying value system. The exception being that you don't mention the ad agencies which work somewhat as clearinghouses or market makers for manually matching content to advertisements.
    Oh, and I not only agree but that's many sites make higher eCPM than selling all inventory to Google.

  4. Pretty much. :-)

    It'll be interesting to see if we return to a model similar to the one we say in traditional media.

  5. Detrus says:

    This http://decknetwork.net ad network seems to have the right approach, and I don't mind it being on many design related websites I visit. I wonder why I don't see it on this site.

    I think Google can make some improvements on a large scale that the DECK does on a small scale. Google is investing a lot in a better search engine (aka AI) to make such improvements possible.

    The DECK figured out that advertising needs a filter that would prevent consumers from seeing ads for bad products. This approach would hurt a large proportion of advertisers, but its ultimately more convenient for consumers. They also seem to filter out poorly designed ads, and poorly designed landing pages.

    Google indexes a lot of data that could filter out the bad services, such as reviews, news, emails, blogs, etc... The hard part is understanding this data and the human motives behind it. This is probably why they are making AI that can understand meanings behind the combinations of words in human speech. It is absolutely vital for them to make this work, they can't win against SEO's and their advertisers without it.

    Another advantage the DECK has is that it controls the presentation of its ads. They pick well designed websites where their ad format will fit. They make sure there is whitespace around the ad, not clutter. They make sure that the ad doesn't get in the way of the user reading content.

    Google acquired services where most content is presented in a well designed way, like Blogger. Now they're missing a service that would help people who are not trained as designers to generate well designed images. This probably isn't as hard as building an AI.

    On a small scale making something like the DECK seems like a no brainer. On a large scale they just need to change the nature of the advertising industry and our economic system. At the same time they could enable more quality products to succeed. I would like to see it work.

  6. Zinni says:

    @Detrus,

    The DECK is invitation only, however I do agree that ideasonideas would make a fine addition to it.

    @Eric

    The ad sales thing is what has put me off too, as blogging is only a part-time venture of mine. I even attempted to work with an online ad sales specialist to get a quasi-network started, however when the economy went bust he got a "real" job. Its too bad, I am sure that there was some serious potential in the long run.

    However I think the solution may be just that simple. Maybe it is just a matter of getting a few similarly focused blogs to join together and getting maybe a commission based sales rep to manage it. I would not be opposed to giving away 10-15% of the monthly revenue if it means higher rates over all.

  7. Zinni says:

    I forgot to add that what I am proposing may be a very "traditional" model, but maybe that is what we actually need. Adsense and other similar technology has taken so much of the human element out of the equation that it is getting easier and easier to demand ridiculously low rates.

  8. David Morin says:

    It is one thing to identify a problem or a not so cool practice after all but what I would like to see after reading this is perhaps better alternatives.

    Cheers!

  9. David Ronnie says:

    I think something we're going to see as well in the future as more and more advertising dollars move online is the development of more localized advertising networks. AdSense has this built in to a certain degree I've noticed based on ip, but I'm thinking even more specific, ie. Facebook's ads (I constantly get ads from other Vancouver schools because of my attachment to the Emily Carr network and Facebook Connect may actually provide a way to make this a reality as well...).

    For example, I could see a definite benefit to being able to purchase a block of ads for "Vancouver" and "creative community" if I was opening up a new bar, clothing store or restaurant in Vancouver. I think being able to cycle the ad across a number of the most popular blogs in fashion/art/music/style/food in the Vancouver area would hold some solid incentive for would be ad-purchasers. You could even make it invitation-only ala The Deck, just constrained to a very local level.

  10. Ryan Burrell says:

    We had a recently local bloggers meeting, and one of the attendees works for the local newspaper. We got into a discussion about the "void" that you mention here, and what will happen when newspapers and other publications eventually fall by the wayside. It was interesting to hear from a newspaper employee's standpoint about how frustrating the production of content for the publication is when the entire company exists almost exclusively on ad revenue. AdWords may be the albatross around the neck of content production for the web, but newspapers have been dealing with the same horrible issue for decades. Having to compete with the immediacy of the Web has only intensified a problematic business model.

  11. Craig Hooper says:

    Great, great article.

    Eric, this is exactly what needs to happen. I think we are about to see the emergence of the niche, and I applaud this.

    On the hosting tip: don't delay, move to (mt) the second you are ready. In the past 3 years, we've only brought our clients to (mt). It is night-and-day dealing w/ them, when compared to other web hosts...

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  13. Jay O'Hare says:

    Eric,

    Thank you so much for this great article and the many more I have enjoyed on this site. If it were not for this site and others like it, discussions like this may never get airtime. Writing, like advertising is not always about the Benjamins.

    PS - Although I am not offended by your profanities, I am pulled a little closer to the screen in anticipation of what would warrant them and what will come next. Shock and suspense are two age-old literary devices that you consistently use brilliantly. You are a talented and compelling writer.

    Thanks again,
    Jay

  14. Thanks Jay--I appreciate that! :-)

  15. The challenge is to present relevant content given that computer users can switch off. Even at present TV channels the world over are facing problems of positioning ads except for very popular events and shows.
    One statistic that needs to be highlighted is the amount offline ads have lost due to the presence of online ads. (Classified and Yellow Pages).
    The other problem is that big companies and ad agencies are used to delivering huge multi million dollar campaigns. It is for smaller ad companies to come up with multiple campaigns which will be better suited for the web.
    To take an example this would be the right time for Pizza Hut or some such entity to come out with a short video campaign on how cheese should be placed on a pizza base. This sort of a campaign could be created quickly, but agencies would have to sell it to monoliths like Pizza Hut which don't think of their feet.

  16. Jeff says:

    This article brings Jackson Fish Market to mind(http://www.jacksonfish.com).

    They create interactive experiences and find a company to sponsor the experience. (I'm not sure if the sponsorship is forever, or if it works like a lease.) You end up with an experience that doesn't feel like an advertisement.

  17. Dio says:

    Very intersting. AdSense does have its merits, though, when targeted correctly and used with taste.

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