GroupThink: The Advertising Business Model

GroupThink: The Advertising Business Model
Written by Samuel in GroupThink

I'm starting a new category of posts here called GroupThink. The basic premise of these posts is that there are certain topics that I think could make great discussions. So, I figured that we should have occasional posts on such topics (and then keep these posts in their own GroupThink section, just like Interviews). As an extra incentive, on every GroupThink post, I'll send over a Starbucks gift card to a random commentor one week after the post.

Today's Topic: Websites That Monetize with Advertising

Back before AdSense, monetizing a website usually meant trying to sell a product or service. Occasionally, you might get some direct advertising deals, but for the most part, the lack of advertisers and ad networks gave you few options. Then came AdSense, and advertising (through AdSense and many other ad networks) became ubiquitous on just about every site imaginable. As a result of this trend, there arose a number of websites whose entire business model relied on these new advertising options.

Over time though, more visitors became blind to ads, and nowadays, most people view advertisements as interruptions or annoyances. In fact, I've seen many people claim a sort of "internet altruism," declaring they would NEVER click an ad and implying that no good internet citizen should. Furthermore, many visitors also perceive that website owners (including bloggers) who use advertising as a revenue model only care about getting their readers into clicking their ads.

So, what do you think of sites that make their income on advertsing? Do you ever click ads? Is it legit for website owners to ask you to "visit their sponsors"? Should visitors expect free content? Would you ever pay for internet content? Why do people expect content and many internet services to be free? Do ads actually make you think less of the website or even the advertiser?

Speak your mind...

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Community Comments

Jay F.H.
1/18/2008 9:37:12 AM

Very rarely do I click Google ads, but it does happen. My eyes have learned to automatically glance right over them. I prefer direct sponsors. I've found many new resources and blogs that way.

In one way or another people have always paid for quality information in pretty little packages. I don't think sites should be any different. Just as long as the sites remain "sponsored" and not "pay to see." I don't think I'd be too happy if I had to pay a bunch of subscriptions to read my favorite blogs. But hey, look at the Kindle model.

Personally, I have ads on my site because I'd like to go full time with the blogging and believe that's a win-win situation for both the readers and I. Plus, I make sure my sponsors are actually quality links. And as far as my Google ads - I try to give them a look that corresponds to my color scheme but doesn't blend in as to "trick" the readers into clicking.

Great post Samuel. :o)

Cody Rioux
1/18/2008 9:48:19 AM

I would say that advertising is a perfectly normal part of the internet. I do use a feed reader to read many articles (including this site) and as a result I often don't get the sites ads in my reader.

Many of these blogs provide me with useful and up to date information that I would otherwise have to pay for (buying a book.)

Because of this I tend to make it a point of visiting their sites, checking out the sponsors and even buying something provided of course that I want it.

Joanne
1/18/2008 10:01:50 AM

So, what do you think of sites that make their income on advertsing? Do you ever click ads? Is it legit for website owners to ask you to "visit their sponsors"? Should visitors expect free content? Would you ever pay for internet content? Why do people expect content and many internet services to be free? Do ads actually make you think less of the website or even the advertiser?

I don't think it's wrong to advertise. I think if it advertising that matches the website content. I would be disappointed if there was inappropriate advertising on a children's website. I don't click ad generally but I have clicked on affiliate banners. That is how I discovered some of my favourite blogs. I think a website owner can do what they want with their website. If people don't like it, they don't have to visit it. Website owners will get the hint if people don't like it. I'm not sure why we expect our web content for free. I guess it started out that way and we now expect it. I do pay for services like flickr and I'm happy with it. I buy a lot of books and I notice a trend of bloggers writing books lately. This is something that I would buy. I like to pick up a book to read. It's less tiring on the eyes. If there are advertisements on a blog that doesn't bother me but if Apple starting putting adsense on their website it would ruin the design. I think it depends.

Interesting website by the way.

Samuel
1/18/2008 10:30:29 AM

@Jay - I agree that Google AdSense (Text Links) has a high ignore percentage. Yet, I've seen some great sites (like Smashing Magazine) that use it it alot -- so it must work I guess. I've never felt that the trade-off (a few cents for making your site ugly and maybe less reputable) was worth it.

@Cody - Yes, the feed system has really made it tougher, although it's up to the content writers to adjust to this trend. I "feed read" as well and to be honest, don't visit the actual sites (but I don't mind the occasional post mentioning sponsors).

@Joanne - I like your points about the dynamics between owner and visitors (owners can do what they want and visitors can leave if they want). I suppose it's a trust relationship and the greater the trust, the more ads seem less like annoyances and more like friendly opportunities.

Link
1/18/2008 11:01:04 AM

I don't have a problem with advertising as a rule (let he who has not sinned cast the first stone, and whatnot) but I do think AdSense on a blog is a bit much.

At least with private ad sales there's some level of potential screening. With AdSense you're at the mercy of Google as to who is "sponsoring" your content.

eve
1/18/2008 11:57:22 AM

I occasionally click on ads, as a thank you to a great article or if the ad is something I am interested in.

I do not use adsense or ypn ads on my sites, they were not converting well. The only ads I have are some affiliate links that I do reviews of and such.

I see no problem with monetizing your website, most everyone has bills to pay and mouths to feed.

Now, if a site has a ton of adsense ads or other ads, I am known to close the page, it is too easy to go too far and if you have to wade through the ads to see the content, it is a spam site in my opinion.

For these spam sites I refuse to click on any ads, no matter how interesting they look and if it is really spammy I report them to adsense, it is spammy sites that makes the whole blogosphere look trashy.

Great article idea, hope it goes well, I am enjoying reading the answers.

Jeremy Davis
1/18/2008 12:32:11 PM

Like Jay said, my brain seems to filter out the Adsense ads automatically. Not sure if thats beginning to be a trend of all types of blog visitors or just design/blogging/tech blogs.
I don't mind the 125x125 type ads but every site only has the same 6.
For sites with good content I try to purchase items through their affiliate programs e.g. I plan to buy the SEObook in the next few weeks and will buy from a site I like to give them a little percentage of it instead of going directly to the SEObook site and purchasing.

George Fragos
1/18/2008 1:42:08 PM

I think advertising is OK if it adds viewer value to your web site. An advertisement has an implied recommendation and impacts the credibility of your site.

Garth
1/18/2008 1:44:43 PM

@ Everyone, in response to Eve.

I also occasionally click on (and then instantly close) ads to flick a bit of money at a site I particularly like, but does this actually do anything? Does anyone know if the site with adsense is paid per click or whenever a click leads to a sale? I'm a bit clueless on adsense so please enlighten me.

Thanks.

Ps. I think there is a small moral issue in doing the above - you make the advertiser pay for absolutely nothing, and you probably make them think their ads are attracting interest. That said, I don't know how often people "click and close" to reward a site, so I don't know how much the practice actually artificially inflates the success of ads. It seems strange to be cheating one person to reward another.

Brett
1/18/2008 2:33:59 PM

There are sites that cash in big time on Adwords/Adsense.. Plentyoffish.com and TechCrunch.com make well over 500k a year on such.. it's simple and free and anyone can implement it, and I think that's the allure of it. If these sites are banking on something so simple, it gives the impression that anyone else can.

On the flip side, I have heard of a few sites that used to do really good revenue in Adsense and now struggle to make ends meet. I think that has a lot to do with the sites audience and their habits with clicking and reading online advertising. I will click on links every now and then if it's something that interests me and that is usually because the ads pertains to whatever site I'm on.

Online Advertising is growing and growing and in some markets has already out done print and some TV markets as well. Companies will pay top dollar to have their name blanketed on high traffic sites, so the money is there. The key is just creating the great content to attract visitors, and then you'll attract the advertisers.

Samuel
1/18/2008 3:29:29 PM

To those discussing AdSense, there was a post today at SEOBook discussing the fact that Google is knocking down AdSense CPM in perhaps an attempt to consolidate good ad traffic (makes mention of Markus Friend, founder of PlentyOfFish). One statistical tidbit is that 90% of ad revenues are made by the top 50 sites (and the top 10 sites make up 70% of that).

Read more at:

http://www.seobook.com/links-note

Andrew
1/18/2008 5:05:08 PM

I think as long as the advertising doesn't become too intrusive, then there is no harm in using it.

If a site has filled every possible corner and paragraph break with an ad unit then I'd be inclined to leave.

Steve Lam
1/18/2008 9:15:45 PM

Using Adblock Plus extension for Firefox, I haven't even seen an ad for years. There's way too many garbage, built-for-adsense trash sites out there.

aurelian
1/19/2008 7:45:06 AM

I think I click a google add once per month, and same goes for my faithful blog readers. That's why I choose to show adds just for IE users and for those with a search engine as a referal.

Sean Hodge
1/19/2008 9:02:05 AM

I think advertising is an acceptable way to make money from your blog.

The more I trust a writer the more likely I am to want to check out the ads on his site. I assume that the writer recommends the product. I like the idea of rotating ads on multiple sites that form an ad group. I tend to click on 125x125 ads to see what they are all about.

I used 125x125 ads on my blogs. I put in some googel ads in very limited spots, but mostly just to find out how it all works not expecting to make money.

Thanks.

Samuel
1/19/2008 4:48:52 PM

Well, it seems that by and large, AdSense ads are ignored or blocked among your average "power surfer."

As for sponsor ads, people seem to be more forgiving as long as the ads are relevant and the site showing these ads has value-added content.

CraigB
1/20/2008 9:57:44 AM

My day job is working as a developer for a small town newspaper with a circulation of about 5,000. Our site does pretty well with about 90,000 visits (450k pageviews) /month.

We offer a substantial portion of our online content for free, but we do have a subscription package to access the full stories, archives, etc.

For the last year or so I've been looking at the best ways to monetize the site through advertising. At this point, we're running a combination of Adsense, CPM ads from Casale Media, and local ads sold through our print salespeople, using openads to manage the campaigns.

Contrary to what I've read here, Adsense performs much stronger for us than the image ads, but our audience is a much less web savvy crowd.

Overall though, we produce more revenue with our online subscriptions than all our online advertising, which seems to be the exception to the rule.

Still, with 450k impressions available, I would expect a higher return than what we're seeing. I'm thinking I would like to experiment in the affiliate space. Has anyone seen good success with that?

Medford
1/20/2008 11:29:26 AM

One the question of payed content...Internet content and sites should remain free. As soon as sites starting charging users to view content cuts out a large & contributory audience. The web is still the ultimate resource for education, information and sharing. Great minds come together as equals to share information.

Once sites start charging their will be another great divide, sites that a free and sites that are not...

Thank you for the fantastic and informative (free) advice.

Rich
1/20/2008 9:07:03 PM

I've used Google Adwords on sites in the past, but I've always used small ads or ads off to the side, not in the middle of the freakin' page like so many tech sites do nowadays.

Samuel
1/20/2008 10:43:58 PM

@CraigB - Thanks for sharing that info. I've always been interested in sites that offer "premium" content and how well they actually do when many people seem to expect free content. As for affiliate programs, I think it would be tough to find intriguing offers for your readers (they seem to work better with audiences used to buying and working online alot). I've also found affiliate programs can be harder to manage since sometimes, you have a different program for each, and the payouts all have minimums. You might want to first try an affiliate ad network like Commission Junction or NeverBlueAds. I've had good success with Google Referrals CPA model as well...

@Medford - I agree that the internet is a wonderful place for sharing information and education. One hypothetical worry is that content becomes devalued and advertising is ignored to the point where quality content cannot pay for itself by ads and has to find other ways.

@Rich - I think people place it in the middle because it does so much better. I think such placement is a problem for sites that don't have established trust (most sites out there). Because sometimes, I'll see some pretty annoying AdSense placement on some pretty respected sites -- and I'm sure it's not affecting readership like it would on most smaller, less respected sites.

Tony
1/23/2008 8:03:16 AM

This is a great topic and one thats come just at the right moment for myself. I run an internet radio station and we're in the middle of redesigning the site to make it more 2.0 friendly.

We currently have AdSense on the home page and it pays enough to cover a wee bit of the costs but in no way covers my fees. This said in the new site we're thinking of having adsense mixed with a 300x300 (or there abouts) add in the top right of the home page. I thought that it might be intrusive but as long as the ads were appropriate hopefully we wouldn't have that problem. Does anyone know what sort of traffic levels a site would need to start targeting and earning from descent ad companies?

T

Samuel
1/23/2008 1:35:14 PM

@Tony - I think your best bet is trying to get direct advertisers, and maybe breaking your 1-300x300 block into 4-125x125 blocks. As for reasonable rates, usually $1-3 CPM is reasonable (price per 1000 pageviews). So if your site gets 60,000 pageviews, charging $60-180 a month depending on your industry is reasonable.

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