• by Laurie Sullivan  @lauriesullivan, April 21, 2010

Digg plans to make Digg Ads searchable within months after the new version of the site rolls out at the end of this quarter. Chas Edwards, Digg's chief revenue officer, explains to MediaPost that search queries will tie to keywords in Digg Ads.

Today, an ad appears in the search results -- but it's random, not specific to the keyword in the query. Stories are returned based on the relevance of keyword by default, but members can sort the results by most recent or most "dugg."

The dugg concept deems what is worthy of praise by other members and gains more recognition as it moves up in the results. The ads will operate similarly. In the next version of the site, the ads database will connect to the main search engine. When community members search for content, relevant Digg Ads will return in queries alongside relevant organic results.

It's important for people who use Digg to understand ad placement. Transparency is also important. It's important to mimic the format. They understand it's an ad, but an ad they can dig.

It's great feedback for the advertiser and mechanism for Digg readers to regulate the ad experience. The people who read Digg see campaigns, brands and content and give feedback by saying "I Digg that." Readers can bury those they think lame.

Campaigns that have higher click-through rates and higher ratios of Diggs, compared with Bury, receive more impressions and lower costs per clicks. Digg wants to create a self-regulating system where the community kicks out advertisers that don't belong in the conversation. Hopefully, advertisers learn from the experience and produce better ads in time.

Edwards says Digg also has begun to talk with advertisers about supporting a "permalink" page for the ads, the page that houses comments and related information, on its site, rather than send members who click on the ad to the brand's site.

Changing the structure of the database would give Google clearance to index the comments on those pages. The Digg Ads live on the brand's page, so they are not indexed by Google today.

The change would require Digg to purchase more servers, but because it makes money from the ads, buying more servers means the company generates more money. The growth in advertising will support that expenditure, Edwards says.

Advertisers pay a cost per click for Digg Ads, compared with display campaign and IAB inventory that operate on a CPM basis. "We're always going to look at what is the effective cost-per-thousand impressions served, even though we charge advertises on a cost-per-click basis," he says.

Success is measured by the quality of the traffic Digg sends them through Digg Ads. Did the traffic convert well? Brands like Toyota or GE look at whether people go to their sites and engage with content.

The performance for advertisers on the Digg Ads has generated such a high volume of traffic -- way above banner ads -- that Edwards says Digg is considering scaling back banner and display ads and rich media ads in favor of more blue links that point to a yellow box.

That box contains headlines to articles the Digg community endorsed in the past. Tests have been underway for about four months. Edwards says Intel and Toyota have used these ads off Digg.com on other sites.

Take a look at the 300 by 250 banner ads that ran in the first quarter on Digg. About 15% of the impressions sold didn't run standard banner ads. "They ran ad units that we helped assemble," Edwards says. "They contain links and headlines to written articles about the brand that had been popular on Digg in the past."