• by Ross Fadner , November 28, 2004

In separate reports, advertisers said they are satisfied with contextual marketing, one of the newer online advertising techniques. Advertisers with Google AdWords and IndustryBrains' IndustryTargets said they are pleased with the returns they're receiving from the respective programs--but for markedly different reasons.

Customers for Google's AdWords say they benefit from the search giant's massive publisher network, while IndustryBrains' clients pay a premium for enhanced relevance.

IndustryBrains focuses heavily on editorial relevance when deciding whether to place links on particular pages, said CEO Erik Matlick. With IndustryBrains' IndustryTargets program, advertisers buy customized categories, not keywords, and can choose which publishers they want to advertise with--something they can't do with AdWords. Because of this ability, Matlick said, IndustryBrains' advertisers tend to be category-specific. Like Google, IndustryBrains charges advertisers on a cost-per-click basis.

Electronics manufacturer Electronics Controls Design, Inc., a category-specific advertiser, complained in a performance report that too many partnerships deliver too many "window shopper leads rather than qualified business buyers."

"The number of qualified venues where an electronics advertiser can market their products is somewhat limited," said Bob Schnyder, marketing manager of ECD's Internet protocol groups.

Google's advertisers, on the other hand, say they benefit from its massive pay-for-performance distribution network. AdWords customer Aaron Dodez, LendingTree.com director of online marketing and advertising, in an advertiser report noted that if no click-throughs occur, his company effectively receives no-cost branding from Google's CPC network. "We value the free branding we get through content pages," he said.

In another report, AdWords client Shane Garrett, CEO of JustFlowers, pointed out that even when Web users do click on an ad, the cost-per-click generally is less than with paid search, thanks to Google's pricing system, which effectively assigns each click a value based on factors such as where the listing appears and on which portion of the site.

"Thirty percent of our clicks come through AdSense content sites," he said in the report, adding that his business sees the branding benefits of AdWords for content, too. "We're probably getting view-through business from millions of free impressions on the Google network."

Eric Frenchman, vice president of online advertising for financial services firm Harrisdirect, noted in its report that most of Harrisdirect's impressions come from AdSense publishers. "In June 2004, 16 percent of my clicks were from content pages," he said.

But in a recent Securities and Exchange Commission filing, Google sounded a warning--stating that increased operating costs, coupled with rapid partner expansion, might adversely affect company revenue in the future. In the filing, Google noted that its publisher network has expanded considerably over the last year. As the cost of maintaining its massive distribution network goes up, Google said it will begin to feel a squeeze, because its average revenue share agreement through AdSense is so low.

In fact, JupiterResearch analyst Niki Scevak warned that the contextual ad network model, led by the example of Google's AdSense, is not sustainable with a revenue share that averages of 80-20 in favor of publishers. On his analyst Web log, Scevak writes, "not only are the dollars spent low, but it is a dismal and self-defeating business," primarily because its publisher revenue share agreement averages 20 cents for every dollar paid by advertisers.

However, IndustryBrains, another contextual ad network provider, hopes to avoid the problems facing Google by charging clients a premium for its customizable, targeted services, said Elke Wong, IndustryBrains vice president of marketing and product development. IndustryTargets is usually much more expensive than AdWords, sometimes commanding a $7 or $8 cost-per-click. It also commands a higher revenue share than Google receives for AdSense--usually either 50-50 or 60-40 in favor of publishers, according to Wong.