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Old 01-16-2001, 09:06 AM   #1
Aaron Dragushan
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Unhappy advertising online: what next?

We're all pretty much agreed right now that advertising is hurting. So the million dollar question is, what next? What's going to save us all?

I think if advertising revenues continue to drop, then soon enough high-quality content sites are simply going to start failing. You have to be able to pay your bandwidth, or you pull the plug.

The current situation punishes success. For a small site, advertising doesn't really matter much. Most people can afford $20 a month for their web project. If it doesn't go anywhere, no big deal.

The problem arrives once the site starts getting successful. All of a sudden there are some serious bandwidth and hosting issues to contend with. There are real *costs* now.

So if advertising isn't there to take up the slack (ie. if people are getting $.05 CPM sometime in the future) then the site will simply fail, as costs rise but income doesn't match it.


There are two concepts that may make a difference in the future, but really I don't know if they'll arrive in a useful form soon enough.

1. Tradition offline firms start advertising online, in a big way. A lot of the big offline firms spend less than 5% of their massive advertising budget online. If that was 25% it would make a real difference.

The problem is that people are of course very cautious about spending online, due to the fracas we all saw earlier. There's a fundamental difference between online startups all trading traffic at high prices, and a real company with a real business model that actually *sells* something.


2. Micropayments. These are small payments made by the visitor to the website owner, to access their content. Paypal is sorta close, but really a successful micropayments transaction would look more like this:

- visitor goes to joecartoon.com
- clicks to see the latest and greatest (hamster gets squished by a bulldozer while mouthing off at everyone in sight http://geekvillage.com/ubb/smile.gif)
- the site tells the visitor that it will cost $.03 to watch the cartoon.
- visitor thinks, "sure, what's 3 cents, I love this stuff!"
- Joe just made $30 CPM

I think this model has huge potential, and is what may "save" high-quality targetted content sites, but it's just not here yet.

What are your thoughts?

------------------[*] Giraffiti: Concrete art spray-painted very, very high. [Coolsig][*] Earn money while building your traffic and mailing list. [Supertaf.com][*] Humour, dance sites, a webcam you can drive, it's a zoo. [Wondermill.com]
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Old 01-16-2001, 09:29 AM   #2
Czar

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I remember the first time I heard about Micropayments (I think from MIT's Nicholas Negroponte in some article I had to read for Uni), I never thought they'd take off. Those were the days when the Web was a "free" paradise. I simply couldn't imagine that I, or anyone else, would spend a whole cent or two to view an article.

Now that the unrealistic honeymoon period is over, though, I'm starting to see the value of their introduction. I mean, I'd rather pay 2 cents to read an article in the New York Times or to play an online game than be bombarded with deceptive links and popups to pay for the content. As a publisher, I can also see the potential of these to bail my entertainment-related content sites out of their current troubles.

Micropayments won't, however, be received so well on directory sites or your average infomation resource. But if the giant entertainment and news sites are generating revenue from consumers, then that will leave more advertising dollars for the rest of us.

Also, while 25% may be a bit unrealistic, predictions made by many trend research agencies suggests that traditional advertisers are slowly moving online:
http://www.nua.ie/surveys/?f=VS&art_...55191&rel=true

IMHO, we've seen the worse. These are the days following the bubble of ignorance and the age of randomly scattering banner ads all over the Web. The fact that the shakeup has forced all of us, and all the ad agencies, to rethink their strategies indicates that the technology and methods employed by publishers is going to improve within the coming months, and should lead to increased value for advertisers, and increased revenue for us! - Damn that's a long sentence! http://geekvillage.com/ubb/wink.gif

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Old 01-16-2001, 09:36 AM   #3
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I like your idea of the micro-payment.

The reason that this would work is that the user would actually receive some "content" for their effort.

IMHO, the thing that has killed the online advertising market is the fact that too many banners and links lead to ****, pop-ups and generally mis-lead the visitor. Blind-links and pop-ups have killed the industry.

A visitor does not want to be mislead. It is an insult to them.

The good old days when you saw a banner for a product that interested you - then you clicked on the product and were taken away for more information is what we need back. Now you see something you may want more info about and when you click you get something totally different or even worse a confusing FORM where your personal info is required.

I have been running a pop-up for SI Magazine for a day on one of my sites. I am waiting to see how much business is garners over a 24 hour period. The problem with this ad is that it says that you get 8 issues of SI for free - no strings attached. But when you go to sign up they want your credit card.

This is exactly the kind of thing I am referring to.
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Old 01-16-2001, 09:45 AM   #4
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I agree, micropayments aren't going to help the Yahoo's of the world, but they've got a different advantage.

They have tremendous influence over millions of people's "free" email addresses, etc. I think we'll probably see a lot of these companies start charging for their services, such as ICQ, AIM, etc.

I forgot to link to Jakob Neilson's article about micropayments (written in 1998!

Or you can read all about 'em in "comic" format here (sometimes I forget how fun it is to read like that!)

------------------[*] Giraffiti: Concrete art spray-painted very, very high. [Coolsig][*] Earn money while building your traffic and mailing list. [Supertaf.com][*] Humour, dance sites, a webcam you can drive, it's a zoo. [Wondermill.com]
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Old 01-16-2001, 10:03 AM   #5
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THis is certainly the most crucial of all issues for me.

I put my site up for fun, a hobby and it was on a free site. More traffic and more to offer meant I went to a 20.00 a month site. Okay, I could do that, but as of today, with the traffic on my site, I'm working on a dedicated server to keep up with the traffic after 5 upgrading moves for more space, more bandwidth and more costs. My current situation is already expensive on a semi-dedicated server....

I handle the finances a bit differently that some websites and yet the same as some.

Besides the ad banners, amazon.com works really well for me. Add to that...one other affiliate that is targeted to my traffic and it helps.

In addition, I came up with merchandising for the website along with a "voluntary subscription" to the site...and I have a store. I haven't wanted to yank the site and make them pay per view, although many of my members suggest it. But many do send money to me because I've explained the costs of the service, the upkeep and so forth and ask for their help to keep the website free for more people.

My site truly is a community and the members want to help. They want to send the money to help with the ongoing costs. Although not a huge profit making venture, the site pays for itself as it continues to grow and I'm not threatened by the decline in CPM the way that many sites have been. Although I like the checks I got last spring much better than the bits I'm getting now, the members are coming through in a way I couldn't have planned.

I think eventually, much of the web will be by subscription. Perhaps a page or two, or a week or so of free, but if you want more, a small monthly fee to come from an easy to pay way(like you are suggesting Aaron) ...with the continued decline of streaming ads. Targeted ad banners will be more savvy, I suspect. (I've had an ad agency contact me because of the traffic demographics on my site and want to place ad banners at a great CPM. I suspect that women's sites will do best right now, even with the downturn of normal ad banner rates.)

This is a great discussion....



[This message has been edited by Kathy (edited 01-16-2001).]
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Old 01-16-2001, 10:22 AM   #6
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Increased expenses is something most visitors just don't understand. I had an experience last week in which a visitor was complaining to me about popups not being necessary. She expected that costs could very easily be paid out of pocket because her site was. Yes, back when I started and was getting 250 or so visitors per day and on a virtual account, paying out of pocket was no problem. But at 3 servers and 23 million page views, it's a much different scenario.

The first thing that needs to happen is advertisers need to stop being concerned with the almighty click. They don't get clicks on television, radio, or print, so it shouldn't be the only measure of success online. Once we get past falling CTR and begin measuring results beyond just clicks, that will be beneficial for all involved.

Another issue is that banners will still be the crux of online advertising for a while. However, there will be new ways to advertise. We're not quite at the stage in terms of bandwidth where we can say "We now pause for a word from our sponsor" and have a TV commercial popup, but sponsorships and other creative types like popups (if you hate them, get over it quick) will be much stronger by year's end. Rich media banners will also become more widely used. Just look at what they did for Treeloot.

As you mentioned, we're going to need to let the the dotcom advertisers share space with traditional advertisers. They're more stable and less likely to lose 80% of their valuation because the wind changes direction.

The question with Micropayments is: will people pay? But it definitely has potential in cases where the answer is yes.

It may get worse before it gets better, but I don't see any way it can't get better. In fact, even though a lot of people have said "It will never get as good as it was," I think that, for some sites, it has the potential to exceed where it was, but it's going to take a long time and a lot of sacrifices, change, and hard work.

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[This message has been edited by SSacobie (edited 01-16-2001).]
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Old 01-16-2001, 10:29 AM   #7
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Old posts are a marvelous way to see exactly what we all thought and what we all said.

Almost 9 months ago some of us saw some of this healthy correction start http://geekvillage.com/ubb/smile.gif
http://geekvillage.com/ubb/Forum5/HTML/000163.html

HTH



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Old 01-16-2001, 10:56 AM   #8
Aaron Dragushan
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Quote:
Originally posted by SSacobie:
The question with Micropayments is: will people pay? But it definitely has potential in cases where the answer is yes.

It may get worse before it gets better, but I don't see any way it can't get better. In fact, even though a lot of people have said "It will never get as good as it was," I think that, for some sites, it has the potential to exceed where it was, but it's going to take a long time and a lot of sacrifices, change, and hard work.
I think people are certainly willing to pay, but there are two things that have to be in place for this next step to take place.
[*] QP = QuickPay, a fictional micropayments company. The very hardest part about the idea is that consumers are going to have to register their CCs with the company. At the end of the month, that company adds up all the $.01 and $.02 charges, and bills your CC.

It's a massive undertaking, but a company like Paypal is in prime position to make this happen, since they have such a leadership position, and this industry is definitely going to benefit from Network Effects (where the value of a network grows by the square of it's size.) Webmasters and surfers are only going to want one clear winner in this category, since their users are going to have to register their CCs with whatever company the webmaster is using.
[*] It has to be very easy. For example, you're at a site, you want to see the page in question, so you click a link with a little QP symbol next to it. For the user, that's it. They're at the page, while perhaps in the background a 1*1 pixel image is loaded from QP's server, and they record the $.02 charge.

Every month, they pay the webmaster, after taking a big juicy 5 or 10% cut, for putting it all together.

I just wish someone would put it together, the demand is there. http://geekvillage.com/ubb/rolleyes.gif I think it'll take a major industry player to do it though, like paypal. It's going to take some serious money to put this together.
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Old 01-16-2001, 12:51 PM   #9
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The thing neede now, is someone to step in and offer very specific banners. For example, if i am a games review site, i don't want health adz or 'click here to win 1 million' adz. No one clicks on these. I need specific to subject adz. This way i will get more hits and so on.

I hope u all understand. I'm just trying to make some sence, its quite late and me thinks its my last post of the day - LOL

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Old 01-16-2001, 01:21 PM   #10
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The biggest problem with micropayments is going to be good old fraud. There needs to be a reliable mechanism to prevent sites from charging you money that you didn't authorize. The way it works with credit cards, where you simply contest all fradulent charges with your bank, simply not going to work for sums like $0.03. http://geekvillage.com/ubb/frown.gif


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Old 01-16-2001, 01:53 PM   #11
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This is a huge undertaking. The transition stage would be messy, why join and give your CC number and pay $0.01 when you can get the information hassle free at another site? Sites would be wary of joining because it would kill all their traffic at initially. What kind of security would there be? Fake content? The only company I can realisticly see doing this and that has the funds to is Microsoft.

[This message has been edited by wolfsheim (edited 01-16-2001).]
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Old 01-16-2001, 02:28 PM   #12
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Micro payments are already well underway...
http://www.qpass.com/ConsumerHome.asp

Companies like the New York Times have been using them for a while....

I think "micro-micro" payments of the 2 & 3
cent variety are a longer way off, if ever. The transaction costs are just too prohibitive.

But those that want to charge a few cents for certain content could alternatively charge a couple of bucks for a month or a certain number of visits etc....

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Old 01-16-2001, 09:30 PM   #13
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Sure, subscription models will work for a few sites with strong audience support, but the Web is more than a magazine rack. It's a beast unlike any other we've seen, and very few people confine their surfing habits to two or three sites/day.

That is where micropayments offer more value than subscription models. For example, you may not want to pay an indie music company $10 for a month's access to their artists' sites, but may be willing for fork over 5 cents to download a legal MP3 track to demo the band's work. Likewise, you may find an article at a magazine-style site that is just what you're looking for, but have no interest in paying several dollars to access the site.

Maybe a combination of both would work - kinda like the shareware model that was more-or-less successful during the 80s and 90s. That is, you are shown a few pages/animations/pics/articles for free, maybe submit micropayments to download larger files or view streaming video and then pay a subscription fee to access the site's archives/back issues.

Of course, the banner will still pay a large part for those sites that would find it hard to gain support for paid content (such as most of my sites http://geekvillage.com/ubb/wink.gif), and pay-per-lead/sale programs will always survive as the one guaranteed form of reciprocal benefit for both advertiser and publisher.

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Old 01-17-2001, 06:20 AM   #14
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Technical implementations aside, the concept of micropayments should work. Especially if sites don't try and milk their visitors. If I could implement anything I wanted to, here's what I would do:

1) On an incoming link, don't charge the micropayment. Let them see your site for free, no matter what they see. Couch this to disallow people who view multiple pages from external links for free, for example if someone sets up a whole page of links to yours.

2) Charge them a very, very small fee. Maybe 0.001-0.005 per page. Or maybe charge them a flat rate for just a few pages and lock in the higher rates if they're heavy users. Maybe $0.01 for the first 5 pages and then $0.001 for every page after that.

At that point, my only worry is to:

1) Increase visitors.
2) Increase pageviews by adding more content.

I don't have to worry about why the CTR on my ads isn't high, or why my visitors aren't buying anything from anyone. I don't have to worry about my pageviews increasing to the point where I can't afford the site anymore.

Of course, once micropayments become feasible, then how do internet companies advertise? No one will run banner ads when they can derive an honest income from their site.

And the huge caveat here is that the micropayment company is going to be no less ruthless than the ad companies -- I expect them to take 50% of the income at first, no less than 25% eventually.

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Old 01-17-2001, 06:20 AM   #15
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somethinig relating to this topic, one site I read about dogpile showing a compilation of keywords people look for and the top two of them were the word FREE and ***. So mostly everyone on the internet wants free information or stuff.
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