It would be a vast understatement to say that a few years ago, advertisers were skeptical about potential of blogs, seeing the blogosphere as an untamed marshland.
"Now, advertisers are running to us and saying 'wow, we were wrong,'" says Venkat Kolluri, CEO of Chitika, a contextual advertising firm which is helping bloggers monetize their efforts with targeted advertising.
The four-year-old company was formed with the idea of giving small to medium online publishers a way to generate revenue and have more control over what type of advertising is featured on their site.
Bloggers using the service have the ability to hand pick what they want to promote on their site.
"It was nice to give the publishers freedom of choice about what they're promoting," says Kolluri. "Initially advertisers were worried that we were giving them control. Now, they're realizing that no one can promote a product the way bloggers can, if they're given the choice and freedom to write what they're passionate about."
Over 12,000 publishers and bloggers now use Chitika, resulting in over one billion impressions a month. The company has arrangements with 1,000 name brand merchants, as well as deals with aggregators such as Shopping.com and CNET. Payment to bloggers is based on pay per click.
One user of Chitika is GPSReview.net. At the top of each post, readers see an "interactive product merchandising kiosk" relating to the product reviewed. Viewers have the option of clicking tabs to see a description of the product, where deals can be found, or to search for something else, should they not be interested in the item offered. "This is our way of saying 'let us help you,'" says Kolluri.
Chitika recently completed a study analyzing blog traffic generated from Google and Digg. The research found that, not surprisingly, Google users were three times more likely to click on an ad than Digg users.
"At a high level, it does make sense," says Kolluri. "We do know Digg is more for [users] interested in gossip items, where Google is more search driven. Those people are intentional and have a specific search goal in their mind, so we see a higher click through rates. But its great to be able to quantify the difference."
The results will help publishers be able to do a better job of catering to the traffic they get from different sources, he notes. For example, rather than focus on getting ad revenue from Digg traffic, they may want to get secondary revenue from Google traffic.
