The Blurring of Search and Media

That Ad:Tech might have felt crowded, overlapping, and utterly confusing – reflects not on the show but the industry. Our industry used to have easily defined boundaries and companies that could fit into independent silos. Like the continents, the landmasses of our industry have shifted over time, blurring the lines between areas that once felt so separate. Of all areas, search and media best exemplify this blurring. This week we focus on how those two landmasses have shifted over time, and we do so by looking at these sectors from mid-2000 until June of 2003 when Google launched its AdSense program for publishers.

In 2000, media meant the banner and the pop-up. Skyscrapers, leaderboards, tiles, and the multitude of rich media units didn’t exist and/or hadn’t gained any traction. The advertiser mix was not incredibly diverse and serving costs too high to do anything outrageously interesting. Per impression and per click pricing accounted for a bulk of the impressions, with cost per action just starting to gain acceptance from the sites and networks that had the foresight to see the arbitrage opportunities opening up. This time was the beginning of a major change in the ad network space. Of the most popular in early 2000 – L90, Engage, Flycast, Valueclick, and DoubleClick, only Valueclick exists today. Advertising.com, while in existence for two years, did not enjoy the visibility that it does today from advertisers and publishers.

The majority of the ad networks at that time made money by playing matchmaker between advertiser and publisher. Ad networks today still do this, but those today do three things fundamentally different. The first is that they assume more risk, this is to say that ad networks today will accept payment on one metric (ex: CPA) but pay publishers on another (ex: CPM). In 2000, only Advertising.com was actively starting to embrace this model. The second difference relates to the methodology that companies use for choosing what ads to serve where. Today, it is commonplace and almost expected that companies use sophisticated problem solving to determine scheduling of the ads. The assumption of risk and the need to extract maximum value from available ads drove this model.

Regarding the third distinction between today’s ad networks, many original ad networks wanted to play more than a supplemental role. They wanted to act as the agent of record for a websites inventory, some choosing to have long contracts locking up the industry. As supply no longer became the constraint, those companies who positioned themselves as gatekeeper, had no model. They did not invest in the necessary technology or prepare for a role as anything but sole provider. The websites who had initially embraced an outsourced sales force quickly became disenchanted upon seeing their flow of ads dry up. Advertising.com, who never had a site representation approach, and along with Valueclick did not go under when the higher priced impression ad dollars left. Tribal Fusion and Burst Media, two other site representation companies and ones that began during the earlier years of Internet advertising, did survive though. Today’s more prominent ad networks, including Fastclick (now part of Valueclick Media), Casale, and Revenue.net, all began during the down times.

Media, until the middle of 2003 and even extending into the beginning of this year, has carried with it an association with graphical ads of set sizes. Today, while many sites still adhere to these sizes, graphical ads no longer account for all of the impressions. On many sites, especially content ones, text ads within that space are just as likely to appear if not more so than a graphical one. More than that, the text ads that appear are not driven by the typical “media” companies (i.e. the ad networks) but the “search” companies like Google and Yahoo, most notably. While more than Yahoo (then Overture) existed in 2000, no other company came close with respect to the number of advertisers, amount of keywords being bid on, and the total volume of clicks.

Having built up an immense following from their better search, Google had the platform by which to launch the first serious competitor to Overture, which it did in October 2002. The convergence of search and media began shortly thereafter. What Google executed in scale before others was treating media as a natural extension of its current advertising business. Unlike companies that focused on graphical ads who typically serviced a few hundred clients, Google serviced tens of thousands. They might not have known who each advertiser wanted to target, but they knew what they wanted. They knew the context, i.e. the keywords.

Rather than thinking of keyword targeting ads as only applicable to search, an activity that passively relies on users to enter queries, they began to look for proactive ways to assess user interest. In part due to their acquisition of Applied Semantics, Google developed the ability to map keywords to content. Their contextual technology allowed them to scan the content of a page, determine its meaning, and find keywords that related to the meaning. Those keywords just so happened to already have paying advertisers for them too. Voila, more places to show their existing advertisers.

Google wasn’t the first to try to put search (context / keyword) ads on web sites. The problem with earlier attempts was that the matching did not generally correlate to the content. High priced words were placed on any content regardless of relevancy, which quickly drove down the bid prices thanks to the market dynamics that search companies created. Even when relevant, content placements do act differently than search placements, something Google figured out and created a solution for in their Smart Pricing system that lowers the actual bid values charged to advertisers based on where the ad runs.

Traditional media companies, those focused on graphical ads, often offer and have offered channel level targeting, but their models cannot support the granularity of targeting offered by contextual advertising. And that gap that began in 2003 most likely won’t close any time soon. That doesn’t imply a full convergence of search and media. Each has its strengths. What Google did was simply realize that the gap between the two didn’t have to be as great and that they could offer one interface for advertisers to reach their users. In doing so, they have changed expectations of ads so that no longer does a 468×60 space imply that a graphical ad will show. Google didn’t cause search and media to converge, but they have sped it up as they attempt to create their own Pangea of all forms advertising. And this is exactly what they will do and what we are seeing with other forms of Internet advertising that typically seemed like two separate continents.