Local online ad spending surged to $4.8 billion last year, a 78 percent increase from 2004's $2.7 billion, according to a new report by Borrell Associates. The report further predicts that online ad spending this year will climb 21 percent to reach $5.8 billion. "Last year's growth spurt was reminiscent of that seen at the height of the dot-com frenzy in 1999-2000, when many local media companies had just finished building out their Web sites and began selling online advertising in earnest," stated the report, "What Local Web Sites Earn: 2006 Survey." For the study, Borrell examined revenues at 2,266 local media properties, including 696 daily newspapers, 148 weeklies, 1,154 radio stations, 437 TV stations, and 24 independent local sites. Borrell defined "local online advertising" as "advertising placed by locally based businesses for locally focused online messages." Online revenues last year at newspaper sites came to an estimated $2 billion, up from $1.19 billion in 2004. On average, online revenue totaled 4 percent of all revenue for 10 of the largest newspaper Web sites--up from 1 percent four years prior. By contrast, Web sites of TV stations generated just $283 million, up from $119 million in 2004; but Borrell predicts that figure should grow quickly as online video grows more commonplace, thanks to increasing broadband adoption. By and large, newspaper sites were profitable last year, according to the report, but the average site lost market share within its designated market area; the average site controlled an estimated 14.8 market share last year, down from 18 percent in 2004. Borrell proposed that the dwindling market share stems from the growing importance of search. "Local advertisers are turning to national search engines to reach local consumers--the same audience that local media companies have traditionally controlled," states the report. Real estate, help wanted, and car ads have become more important to newspaper sites in the last year, according to the report. Last year, ads in those three categories accounted for 75 percent of online revenue, up from 70 percent in 2004. At TV stations, automotive ads accounted for 25 percent of online revenue, up from 18 percent in 2004; real estate was the second single largest source of online revenue, generating a little more than 15 percent of online ad dollars, while health care was third, accounting for slightly less than 15 percent of online revenue.
In a move that could impose significant costs on bid management firms and other search engine marketing companies, Google has decided to start charging on a per-use basis for its AdWords application programming interface, or API, which allows software developers to design applications that send and receive data to and from its keyword ad auction. The new pricing system will go into effect July 1. "We are changing the quota allocation system and pricing model to create a more flexible and level playing field that encourages efficient coding and application design. Effective July 1, 2006, the current free quota system will be replaced by a usage-based system," wrote Google product manager Rohit Dhawan on the company's blog. "As a result, current developer quota caps will be removed in order to provide a more flexible and scalable system for quota allocation and consumption." Previously, Google made its API available for free, but limited usage based on the amount of ad dollars being managed. Under the new system, developers will be charged 25 cents per 1,000 times the API is used to call data. Josh Stylman, managing partner at search engine marketing firm Reprise Media, said the companies affected most by these changes will likely be bid management firms, which call and send data to and from the API multiple times per hour to change keyword bids in real-time. "The firms that are hurt more by this are likely the big management companies, particularly ones that overuse the API," he said. "Companies that are crawling the system once an hour, twice an hour--essentially bid management companies--are going to have a higher economic cost." Stylman said that the change could mean bid management, previously seen as the key sector of search engine marketing, could recede in prominence, as marketers would seek another way to optimize their keyword campaigns beyond dynamic control of bids. "There's been this misnomer in the marketplace that bid management is search marketing," he said. "We may see the era of 'bid management as search marketing' come to an end, in that people are finally going to have to take a look at campaigns more holistically." Ellen Siminoff, CEO and president of Efficient Frontier, a search engine marketing firm that does bid management for its clients, said that bid management firms would not face major problems if they were efficient in their use of the API. "As long as you're efficient with your system, there's not a huge issue associated with it," she said. "Everybody that uses API are going to have to be more efficient in how they use it, so they can continue to get a good return." Siminoff said that Efficient Frontier did not have any plans to change its practices following the change in policy. Google did not return calls for comment.
Vying for the attention of today's young people, book publisher Alfred A. Knopf on Wednesday announced a partnership with marketing services company Y2M: Youth Media and Marketing Networks to promote Knopf's authors over more than 350 college newspaper Web sites. The ads direct students to 21stCenturyLit.com, which features excerpts from new Knopf titles, reading groups, bestseller lists, podcasts of authors reading from their own works, and a list Knopf events around the nation organized by Y2M. The site is also soliciting book reviews from students, the best of which it will post online and reward with free Knopf titles. Y2M provides content management systems to student newspaper sites at no cost in exchange for space to serve ads from its 100-odd ad partners, including Amazon, Apple, Ford Motor Company, Goldman Sachs, and Samsung Electronics. Knopf is Y2M's first and only publisher advertiser, according to Dina Pradel, Y2M vice president and general manager. Beyond its relationship with Y2M, Knopf is currently involved in a number of online marketing initiatives, said Scott DiPerna, manager of special marketing at Knopf. "We've been generating independent sites for authors for a long time, and more recently have worked with authors who aren't particularly well known to create MySpace profiles." Before Knopf agreed to market its wares over Y2M's college network, they conducted joint research to learn more about student's reading and book-buying habits. Ninety-seven percent of college students within Y2M's network reported reading at least one to two books outside the scope of their courses each semester. In addition, 79 percent reported buying new books at bookstores and another 44 percent saying they buy new titles from online vendors. "We found a greater level of sophistication and interest in reading than expected," remarked DiPerna. "That means we should be paying more attention to this demographic."
The niche social networking site Sisterwoman went live Wednesday with Neutrogena and the TLC cable network as lead sponsors. Aimed at women between the ages of 25 and 50, and co-founded by online advertising vet Allie Savarino, the site touts itself to marketers as offering a sponsorship format that melds editorial, advertising, and consumer-generated content. Beyond standard display ads, both TLC and Neutrogena are hosting "sister circles"--multimedia pages that surround their respective product offerings with relevant pictures and site links, as well as member profiles, discussion, and other postings. The purpose of such environments is to remove perceived barriers between advertising, editorial, and user-contributed content. Female visitors are encouraged to create their own circles--either private places with friends and loved ones, or open interest. Like other social networking sites, Sisterwoman facilitates the exchange of words, videos, photos, and social calendars between the members of its community. Sisterwoman expects to name about eight additional sponsors from key industries within a month, including consumer electronics, financial services, autos, and telecom, said Savarino. Savarino, who helped launch the streaming media company Unicast, believes that advertisers and publishers are just now catching on to women's Internet usage habits. "We're giving advertisers new ways to deepen their relationships with women," she said. "And for women, the deeper the relationship, the better." A report released earlier this year by Deborah Fallows, senior research fellow at the Pew Internet Project, indicates that men pursue many Internet activities more intensively than women, while women frame their online experience with a significantly greater emphasis on deepening connections with people. The self-described "women's community site" iVillage--which NBC Universal last month agreed to purchase for $600 million--is presently the most popular "woman-oriented site," according to comScore Media Metrix. In January, iVillage garnered 14.5 million unique visitors. Through affiliate partnerships, Sisterwoman on Wednesday invited roughly 86,000 women to join its community, said Savarino, who is projecting 1.2 million uniques by the end of August. "That is a number that we feel is very realistic."
More than one in five U.S. adults, or 22 percent, say the Internet is the most effective way to grab their attention about a product or service, according to a report released Wednesday by Burst Media. But TV retained its prominence as the most attention-grabbing ad medium, with 50 percent of U.S. adults reporting that the tube captures their interest most effectively. The report, based on a March survey of 3,700 adult Web users, also found that magazines, newspapers and radio lagged behind both the Internet and TV, with 12 percent, 10 percent, and 6 percent, respectively. Though respondents gave Web ads high ratings for capturing awareness, they were less than impressed with the quality of such ads. About 40 percent of respondents said that the online campaigns they could recall used recycled versions of ads that had appeared elsewhere. Twenty-three percent of respondents said online campaigns were "worse" than those seen in other media. However, among the 22 percent of adults who said that the Internet was the most affective at grabbing their attention, perceptions of ad campaigns were much better, with 57.5 percent describing the online campaigns they could recall as "cutting-edge." The study also found that the Web far outpaces television as a primary source for information about products and services, with 57 percent of respondents saying that the Net is where they turn first to research products they might purchase.