Erik’s Blog: Board Shorts and Business Suits

The recent tumble of Yahoo’s stock shares sent the tech sector plummeting and business people worrying if advertising dollars had hit a peak. Google shares followed suit dropping like a rock by it’s largest single day loss of 8.5% or over $36 a share. With all those people out there blogging about how they’re finished working for the man and busy publishing AIS sites, it’s a wonder we didn’t hear more tones of worry in recent posts.

It seems as though everyone and their mother, literally, is starting some type of niche AIS website aimed at getting traffic via search engines and turning that traffic into money making clicks. I regularly read the following blogs related to AIS; Burt’s osCommerce, Jonathon Wold’s, jcCommerce, and, ProBlogger. All these sites discuss how click’s earn them money and the sites that are doing it for them. Burt’s osCommerce recently held a challenge to develop a niche website, launch it, and see how much money it could earn in a month. 12 people have joined and most of them are doing quite well from what I have seen, 3 have made at least $50.

Most of these sites rely on click-through traffic. Later I will get into why I think click-through traffic is going to slowly lower in value but for now I will just mention that it’s usually used on sites geared towards search engine results. Repeat visitors tend not to click through as much. For those sites like cnn.com, espn.com, and myspace.com, where visitors return often, the publishers need to use more creative approaches to advertising. Things like review spots, placement of graphic ads, pop-ups and what not. It’s like TV, you don’t click through the commercials but if you see a Coke enough times next time you might order Coke rather than Pepsi.

What’s Leading the Online Advertising Push

Besides the fact that thousands of people get introduced to some form of the internet everyday, the DVR. The only guaranteed captive audience any more are those searching web pages, sifting for knowledge and seeking out entertainment.

That simple acronym has made thousands of advertising execs come in off the golf courses and re-think their advertising program. With the advent of Tivo and now DVR for Time Warner, the Dish, and numerous other services, the public doesn’t have to subject themselves to 10 minutes of commercials per 30 minute show. I realize that VCR’s have been around for decades but they have never offered the ease of use which DVR does. There’s no comparison. What this means for advertisers is that they have to begin looking at new ways to promote products.

DVR relinquishes a viewer from being a captive audience. Even if before DVR you went to the bathroom during a commercial break or the kitchen to grab a snack, you’d still spend more than 75% of TV time watching commercials. Now with DVR you can pause live TV, spend 20 minutes getting ready to go out for the night, come back and watch a whole one hour show commercial free ending near the same time the live feed finishes. It’s about time too, I pay enough for cable TV, why should I have to sit through an hour of commercials each night. Not everyone has a DVR, this I know, but soon enough they will be as standard as cable TV, which people also thought was a foolish idea. “Who would pay for TV when I can get it free with these great big antenna?”

Advertisers need a captive audience and what better place to get that audience then online. I go to web pages and can’t help but view ads. They’re everywhere, some helpful, some annoying, but plastered all over. Contextual ads, poster ads, moving ads, talking ads, pop-up ads. Advertisers are constantly developing new ways to get their message across to a user. If I want the information on a page I have to look at ads and advertisers know that. For all you publishers this is what you want to keep in mind.

Of course there will be a new browser that blocks pop-up ads or removes ad code completely before displaying a page, but there will be ways around that. Popular pages that everyone wants to go to or has to go to, not just those search engine friendly pages, will write code that only displays if their ads are displayed. It’s the never ending battle of technology, something that the music industry has already spent a few years waging war against.

There could also be a technology that only allows you to watch a TV program if you have to watch commercials but I find this a little less likely. As I mentioned VCR’s have been around for quite a while and never raised much of a stink after their initial release into the world of media. Aside from that, the biggest cable providers, Time Warner and Comcast have already embraced the revolution and come out with a DVR service of their own. That would be a lot of wasted money on components and advertising, but, I guess we’ve seen corporate America do stupider things.

I’m not saying the 30 second commercial will go away, it has become a staple of network TV and they won’t give it up without a fight. The times where I still see commercials are when I watch live TV. Yes, TV shows will have to go back to being so good they make audiences want to be the first to see them. Who wants to be the last one to know what the heck is in the hatch on ABC’s hit drama Lost, I sure didn’t’. Sports programs are prime examples of shows that are tough to watch afterwards. Only die-hards can withstand constantly being on the lookout for a newspaper article, conversation, or email that will ruin the playoff game they just tivo’d last night.

Yes, times they are a changing and the advertisers will have to make the shift to the internet in a big way. They will have to look for those sites which create daily traffic and bring in huge amounts of repeat eyeballs and turn new eyeballs into repeats every single day. Places like myspace.com, engadget.com, espn.com, and yes, even stevepavlina.com. These types of sites, not just search engine friendly sites, are where big ad dollars are going to be spent. And since the online world is so fluid there will always be a new big player lurking around the corner. Getting someone to change favorite shows from the OC to Dancing with the Stars is pretty tough, but when they can use the click of a mouse to go from Gizmodo.com to Engadget.com without needing to be caught up on plot, there’s a whole new ball game out there. With the internet, like tivo, the content is always there for you to go back to, (unless of course you make it 2 day only content, hmm).

Click-Through Will Change

If you think click-through dollars will remain strong you are sadly mistaken. I’m not saying people still won’t be able to make a living on creating AIS sites, or having ads on their blogs. People will click when they see a link they like, it’s the nature of the internet. What I’m trying to say is that there will be more and more people seeing others making money this way and will want to join the party. This in turn diluting each niche that’s out there. Of course there will always be another niche created, almost daily, but more people will try to jump in that niche as there are more niche site builders and so on and so forth.

I will reiterate that the basic idea of a click is to earn the publishers money by a visitor leaving their site. The only real trouble with this is how do you know if those who are clicking are really clicking to view the ads or are clicking to make the publisher money. Now I know everyone believes that Google, being lord of the internet, is able to truly tell when clicks are false. How naive. And you can’t tell me that you haven’t been past some of those great sites that give you all that wonderful information on how to monetize your blogs and clicked on an ad or two saying, “why not give him/her some money, they give me great info?”

Isn’t this cheating the advertisers who pay good money to Google and Yahoo for clicks to their websites? Of course it is. Also creating click-through woes are bots specifically designed to click AdWords ads on search result pages as well as making their presence known on sites such as blogs. These click bots can supposedly be curtailed by tracking a user, in this case the bots IP address and keeping track of previous search engine activity and click through activity. With this in mind the perpetrators have developed IP masking and relocating software, kind of like phone tracing re-routers.

Now I won’t get into the why people would go through all the trouble to falsely click ads on a grand scale. Rather, I want to delve into why I think online advertising will continue to be big money and where I think it is going in the future.

Click through advertising needs a formula. I’m not talking person-A clicks 5 times on person-B’s website in 3 days, or person-A doesn’t usually click on ads about fitness so it must be false. That’s not going to solve the problem of false clicks, it will just loose money for ad publishers. Someone needs to do research such as the Google twins did for their unfinished doctorate and come up with an algorithm to successfully weed out false clicks. I’m talking something like:

IP address-A click on 2 ads from IP-address-B’s website, and was only on the click-through for 10 seconds each, and IP-A has sent email to server with IP-D and IP-B has logged into a server related to IP-D and sent email to IP-C which IP-C has a website on IP-E that writes about IP-A, therefore has a 10% chance of being associated with IP-B, therefore the click through cost of ads on IP-B’s website from IP-A clicker are 10% less than they would be for a random person such as IP-Z having no relation to IP-A, B, C, D, or E except they visited IP-B’s site.

This will open up a whole new field that some smart student right now is probably already thinking of. There are companies out there such like Authenticlick.net and adwatcher.com who offer services related to stopping click fraud. How good are they, who knows, but don’t you think Google would have bought them out or be using their software instead of fight million dollar lawsuits in court over false clicks? The battle against false clicks will be continuous and one that slowly lower the cost per click the publishers see in the end.

False clicks coupled with more and more content based AIS sites will eventually bring the click-through only monetization scheme to a nice bar tab leveler income rather than a pay the mortgage level. This is where sites that bring in repeat visitors will become the main attraction on the internet. Like TV shows, such as Lost, that bring millions upon millions of viewers every week, websites that create traffic in a similar way will become the staple of a true online entrepreneurs portfolio. Eventually if you want to make it big you won’t be able to sit idle watching clicks create buy you that new Porsche income.

The Future of Online Ads

As I was saying, the future of online advertising will switch to those people who can show they are generating repeat traffic with growth or the potential for growth. The reason Weblogs Inc. was able to sell for $28 Million to AOL wasn’t because how much they made on their blogs, it was because of how much growth they had as a company and how many eyeballs they were able to keep coming back to their pages, ultimately measured in page views. Jason Calacanis, CEO and co-founder of Weblogs Inc. makes a point of reiterating this in his blog within several posts. He mentions how they were able to sell key spots of their weblogs long before they ever made a million dollars a year from AdSense.

Steve Pavlina one of those lone shark bloggers out there, has just offered a top spot on his page using the blogads medium. Even he, the great leader of probably thousands of new bloggers over the past year has come to see the light that the real money in online advertising is gaining single source advertisers paying top dollar to reach your regulars. Even the six figure man himself, Darren Rose, has a post (via Arieanna Foley) about advertisers shifting money to blogs. His company B5 Media has sponsors, you can see in the left hand column. Sponsors that sought out his blog network to specifically target his repeats. My guess is on a monthly pay schedule rather than a click-through basis.

Big money in online advertising is already in sites like these that keep people coming back and will continue to shift there. The next big opportunities in online money making is in sites like HomeStarRunner.com that offer a weekly and sometimes daily show update to viewers on the internet. Advertisers will either create these sites themselves or pay others who have these sites to run their clients ads on them. Banner ads, pop-ups, prior to entering ads (those are those ads that myspace.com started to have once they were bought out over the summer, did you even notice?), will become common place among those regular blogs you can’t live without.

Couldn’t you see a company devoted to designing strictly advertising shows, like Initial D but for a Saturn. I’m sure they’re already out there, I just haven’t spent the time to look for them. Young kids will want to come back to see what sweet drift Yoshi Kaboshi did this week and before you know it they’ll be driving and asking Dad for that pimped out white Toyota hatchback (yeah I mistakenly ended up with one of those, no prior knowledge of Initial D though.)

In Closing - My Crystal Ball

I guess what I’m trying to say with all this is don’t go believing you are going to sell your blog network for $28 million dollars. Unless you are building a cult following such as Steve Pavlina, Darren Rose, and newcomer Yaro Starak of course. I’m sure they could sell the ad rights for their blogs for a pretty penny. I am sure most of you AISers out there will continue to make a nice chunk of change from the thousands of sites you are creating. Hell, I’m even trying to jump on the band-wagon. All I’m writing this for is to simply offer an opinion of where I think the next swing in online dollars will come from.

I strongly believe repeat visitor sites with the potential for growth will become the standard by which people can make dollars via the internet. More sites offering the same information will be posted every single day and less revenue will be earned through click-through advertising. Create a brand, create a following, and you could be hearing from Mr. Gates wanting to get in on your Intertainment Network of Sites.

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