Making Waves in Contextual Advertising

(Searchline) According to marketing research firm eMarketer, advertisers will spend about 13% of their online ad budget on contextual ads in 2007 and almost 43% on paid search ads. But the Online Publishers Association found that the Web audience in January 2007 spent only 4.7% of its online time conducting searches and about 45% of its time looking at content.

Why the disconnect, and what does it have to do with the content-targeting ad platform from Quigo Technologies?

First question first
Placing ads next to Web content has been a kind of red-headed stepchild of search marketing for a while now, and not just because of the relatively small budgets it has attracted. Many analysts treat contextual ads as a subset of search, mostly because delivery of the ads is triggered by a keyword or a set of them on the content page. But that doesn’t mean the person reading the page is in anything close to the in-market frame of mind of someone who is in even the early stages of researching a purchase. Conversion rates have reflected that difference.

Then there’s the matter of how contextual ads have been sold: for the most part, with little visibility for marketers into where their ads were being placed. In the ancient times (that is, before 2004), Google and Yahoo! didn’t even split bidding on pay-per-click (PPC) ads into search and contextual channels. Advertisers simply elected to have their ads served either to search or to search and contextual pages and paid the same rate for both. Marketer complaints at paying the same rate for two very different types of click traffic made the networks change that policy.

But it didn’t force them to make corresponding adjustments in the transparency of their content networks. Neither Google nor Yahoo! has specified how many sites are in its content network or provided full listings of those properties. The networks have maintained that since the contextual ads are performance-based, advertisers pay only when they provide traffic.

But many marketers would say it’s not that simple and that their brand images suffer when their ads show up on pages with low-quality or even objectionable content. At the beginning of this year, Google gave marketers the ability to exclude up to 500 sites on its AdSense network. But since Google itself says the network includes “thousands” of sites, marketers who ran through that quota were left wondering how many of the remaining pages were small blogs or sites with useless or possibly controversial content. Yahoo! so far doesn’t offer any site exclusion, although that’s been hinted as a future enhancement to its Panama ad platform.

So, to review: lack of visibility into ad placement, or even into the exact roster of Websites in the Google and Yahoo! publisher networks. Bare-bones reporting on clicks that did not include their origins. And a historical mindset that said all PPC clicks are basically equal. In the face of that kind of experience, it’s much less surprising that advertisers have chosen to beef up online ad spending on search, where they can more accurately gauge effectiveness and where higher keyword bids are offset by higher conversion rates.

And that’s where Quigo comes in.

A visible difference?
Quigo’s AdSonar Network has been reaching out to some of the biggest marquee names among Websites, offering either to serve contextual ads to their pages or to let them auction off and deliver contextual ads on their own. And for advertisers, Quigo has been offering full visibility into what sites their contextual ads are appearing on and even what portions of those sites. Advertisers can also choose to target their ads nationally or locally.

The Quigo proposition has appealed to a contingent of big-name Web publishers because whether the ads come from Quigo or their own sales force, they stand to make more revenue than they would by syndicating PPC ads from Google or Yahoo! Several destination Websites have decided that offering private-label contextual ads through Quigo is an efficient way to leverage the brand equity they’ve created in their properties.

During the past year and a half, Quigo — founded in 2001 — has signed deals with a stable of media sites that tend to draw heavy repeat or even daily traffic: ESPN.com, USAToday.com, ABCNews.com, FoxNews.com, Newsday.com, regional sites from Cox Newspapers and the McClatchy newspaper chain, and most recently Forbes.com. Other publishers that have adopted Quigo’s platform include Golf Digest, CareerBuilder.com, the Fodors.com travel site, and wedding site TheKnot. Most of these relationships are exclusive; if you want your ad on ESPN.com, you’re looking at the AdSonar Network and that’s it.

While it still commands only 10% of the contextual spend, compared with the 60% that goes to Google, Quigo’s strategy of signing high-profile sites and in some cases poaching them from the big search names — ESPN.com had been a Yahoo! distributor before switching to Quigo last fall — has raised its own profile in the online advertising market.

In fact, a recent article in “The New York Times” gave Quigo some of the credit for prospective changes in the way Google will sell its contextual ads. The item quoted Kim Malone, Google AdSense director of online sales and operations, to the effect that Google plans to begin listing the sites that deliver a specific ad and to let contextual marketers place bids on specific Web properties. Those changes are in addition to a revision in early February that lifted the 500-site cap on site exclusions on the AdSense network.

Quigo chief revenue officer Henry Vogel sounds a bit nonplussed about attributing any changes at Google to the competition his company has brought to contextual advertising.

“I have the utmost respect for Google,” he says. “I think they’re a terrific company and a worthy competitor, and they’ve probably been working on these changes for some time. Imitation is the sincerest form of flattery, and I think we have a better mousetrap and a better solution for both advertisers and publishers with our transparency. I think Google is just coming around to that same point of view.”

Vogel says the online ad models that have predominated in the past just haven’t worked well for contextual advertising. “It’s not media, which you buy on an impression plan, saying, ‘Here’s where I want to be and when I want to be there.’ And it’s not search, which is very directed and high user-intent. In both those models, you know where you’re going to be. Contextual has so far been a little bit of both and not enough of its own.”

Quigo has aimed to blend aspects of both those models into an efficient hybrid, he says, combining search marketing’s performance basis, relevance, and targeting ability with the control of the media-buying experience. “We think the combination of those two is really powerful and drives incremental revenue for content owners,” he says.

And Quigo hopes a new deal will open that revenue tap even further. The company has announced a developmental partnership with Pixsy Corp., a media search platform company that builds private-label image and video search engines. The relationship will let Quigo serve ads into the media content that Pixsy indexes, with the aim of offering Websites their own multimedia search capabilities complete with performance ad inventory.

“We were impressed with [Pixsy’s] ability to build an index of thumbnails and multimedia content and then private-label it for third-party Web ites who may want to both search their own content and bring in content from outside,” Vogel says. “As the Web moves to more full-motion video, we saw a chance to combine our content-targeting program, combine it with multimedia search, and offer our publishers and theirs the ability to create a topic-specific or location-specific search portals.”

Using the Pixsy image search with Quigo contextual ads, for example, visitors to a regional newspaper Website could search for video or pictures of local events and attractions. That content would be served up with PPC ads, with a portion of the revenue going to the Web publisher.

While the multimedia ad products resulting from the Pixsy collaboration may have a lot of appeal for large national advertisers interested in targeting to a specific topic or event, they could also be useful to smaller local advertisers. “I think this really opens up the window for local small and medium-size businesses — largely direct-response advertisers — to be able to play in this space,” Vogel says. “To date, they really haven’t been able to take part, either because it hasn’t been affordable or available in a self-service, user-friendly format.”

Right now Quigo is serving only text ads, but Vogel says the company has been testing both PPC display and video ads and will probably build those into the Pixsy ad inventory. “That’s probably where we’re headed with this deal,” he says. “We’re skating where the puck is going.”

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