Learning The Business of Web Advertising…Day One

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  • on March 17th, 2010

As a co-founder and CEO of Stocktwits, and angel investor in so many web deals, I spend a lot of time thinking about web advertising.

Is it worth doing it?  What’s the time sink?  How do I measure it?  how do I sell it? Who should we sell it to? Where do I buy it?

One person Soren and I have asked to help us with all of the above and more is Jonathan Mendez who has a cool blog as well ‘Optimize and Prophesize’.

In response to my ‘Transparency Post’ yesterday he commented:

Advertising legacy was actually noted early in its formation as the famous Department store scion John Wanamaker with the famous line “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Now we live in a world where we gaining the intelligence to know “which half” — problem is for media and agencies, once everyone knows, that half doesn’t get spent.

The rise of performance advertising on the web counters this in an interesting way as dollars are managed to volume (sales/leads) and cost per. Here waste is weeded out rather quickly. The most interesting thing going on here in regards to waste is how Google brilliantly manages it. This is really their “special sauce” and unless you are really in the depths of Search Advertising you wouldn’t ever stop to think about the effects of waste during on-boarding or the use of match types or quality scoring but it’s happening. The lesson here is that if you can make a system that can bundle in waste but still makes people happy & successful with a modicum of transparency, you’ve hit a grand slam.

Interestingly, display advertising, once hailed as the bastion for Internet brand dollars is also now being consumed by performance campaigns because of the falling prices (due to increased supply). The issues here are a bit different as transparency is hindered due to the many layers of networks and technologies that have evolved in the stack between the publisher and advertiser. That will change. Performance dollars follow the path of least resistance.

Are people scared of the real numbers? In display they should be.

Ad impressions on Search are FREE. In Display every impression costs you money. The amount of people that click ads from search on a per impression basis is 4600% higher than display. That’s a big number. When your industry is broken to the core, why would you want to shine a light on that?

Not to worry, this decade will begin the rise of new advertising channels and I believe, as you do, transparency will be a core value prop.

I just completed my opening statement.

If this topic is important to you…head on over to his blog for some good reading. That’s what I have been doing lately. Please chime in with some other great blogs on the topic of web advertising.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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