KnowVertical Blog

Research: The Long Tail...

There is more and more data supporting the continued fragmentation of the web.   The signs are clear that consumers are becoming more and more comfortable with the web and adventuring out to new and exciting sites.

Data from some of the largest audience measurement companies, including comScore, Compete and NetRatings, display the continued growth of quality, but targeted content on the web.  One example of these trends includes data from the Compete panel.  In late 2001 the members of the Compete panel visited about 2.8MM websites, counter that stat with late 2006 where the panelists visited over 5MM websites.

Other data sources have even shown deeper fragmentation, depending on how you define websites.  Alexa reports over 80MM websites live today, though this has grown by 50% in the past few years.

The other important stat in relation to this fragmentation effect is the fact that people are spending more of their time and page views on these smaller, more targeted sites, than ever before.  Compete in the same study presented a disproportionate growth in user page views on smaller tail sites than the big six.  Additionally, in 2007 it is estimated that almost 50% of consumer’s page views and time is spent in the tail.

The long tail is here to stay.  It is critical to recognize that the tail is rich with valuable high quality sites.  Even if the 80MM websites that are live today were to be mostly MySpace and ad spam sites, a conservative 2% of sites would still suggest 16MM sites are out on the web for someone to visit and engage with.

The chart below gives you a good sense of this expansion of the web.  The trend over the five years has been a declining share of total minutes and page views across the top four sites (AOL, Yahoo!, MSN, and Google).  Within this chart you can see that the total number of page views has increased by over 40% in the past few years, but a larger percent of this growth is going to the tail.

This data, more than any other, supports the continued need for consolidation of these high quality sites to bring to advertisers.  Someone is going to consolidate this content, will it be you?

The AdSense Surprise…

Many bigger publishers or broad network entrepreneurs come into the planning around their network with one big mistaken assumption.  This assumption has existed in the market now for many years, and when people are presented with the truth they are usually shocked.  The problem with this ongoing myth is it is getting more and more off base from reality and has a real risk of having your business models for your networks far off of reality.

Over the past few years this misconception has had ripple effects on sites and on network operators and in many cases has had a dramatic impact on their business plans and financial models.  What is the misconception you might say?  Okay, enough of the drama!

The biggest misconception in the market today has to do with Google AdSense.  Most people in big sites or with limited multi-category experience with AdSense have strong beliefs that the effective CPM paid by Google is extremely low and way below the market rate would be for the similar ad spaces on an open market. 

Most large publishers have the belief that small sites are making pennies on the dollar with AdSense and  that even with a CPM less than a dollar that the network operator would be blowing out the marketplace and publisher expectations. These assumptions make sense, why would random text ads on my blog about my kids be really worth anything to a direct response advertiser?  Why would random text ads showing up along side the video or funny joke I sent my buddies really bring more than a few pennies to the hosting website?  But this is not what you are going to build your ad network on, most likely, and Google AdSense was developed to match advertiser’s goals to consumers.

Yes, there are many cases where Google is paying a ridiculously low rate for their member sites text and image ads.  Rates in the .10 to .25 range for CPM's is not out of the norm for sites that have heavy traffic with low specificity of content (aka focus).  There is a general AdSense effect on pricing of the ad space, depending on a few variables. 

The most important variables in how well AdSense performs are how specific or targeted the content is on the site.  This doesn't translate to sites just about Mesothelioma (the top paying keyword for years on Google); it actually includes all major high value categories online, such as Travel, Business, Financial and more.  This effect also holds true for highly targeted content, for example a site about bed and breakfast hotels in upper Maine targeted toward families with kids would potentially get very high payout due to the very specific content on the site. 

The second variable that has a pretty dramatic effect on how well Google AdSense will pay is how big and how many pages the site has (overall traffic).  The more users and the more pages the less effective the overall advertising will perform on the site.  Though Google has over one million small businesses buying on their keyword product, there is still the potential to run out of high performing/paying ads for the site. 

So if you are recruiting a broad category network that has a lot of general keywords, such as viral entertainment sites, and many of the sites are more vanilla in content, the Google AdSense program will probably be on the very low end of performance.  Most of these sites will also be in other remnant programs to help supplement their revenue, thus even diluting the effectiveness of the AdSense ads more. 

This chart gives a snapshot of some of the ranges of pricing that Google is paying at the eCPM measurement.  The snapshot is an estimate based on over 200 sites that have signed up for networks and have provided details around their Google AdSense performance.  Of course the data is a snapshot in time and has some subjectivity in how specific the content is on the site.  Though there are always exceptions to the rule, the overall chart is consistent with the AdSense content/size rule. 

Check out the other post on some of the remnant eCPM's that are currently being aid in the market.  Though the marketplace is constantly changing, the base rules have been consistent for years.  The main message is not to get stung with the AdSense surprise.  The best thing to do when working on an overall model for the network you are building is to do some more detailed research into your marketplace.  Don't rely on just your sites performance on AdSense, as you will be surprised when you realize that some of the sites you are interested in recruiting into your network are making $50+ eCPM in AdSense. 

What we suggest you do if you run into a site that has a high AdSense payout (eCPM), have the site create a new ad unit for your brand sales.  Though you might have to negotiate a different placement, it at least gets them into your sales kit and your network directory.  Remember that the key to a successful network launch is to find creative solutions for the market.

Internet Displaces Radio As Fourth Biggest Ad Medium

The trend continues, and is only good news for ongoing Vertical Ad Network development.  Based on a recent release by eMarketer, internet ad revenues are set to pass radio for the first time ever. 

This data is according to a firm that tracks and analyzes spending trends across various media. eMarketer is pegging Internet ad spending at $21.7 billion, compared to $20.4 billion for radio.

Some of the key findings in this study include:

• Veronis Suhler Stevenson predicts that the Internet will displace television as the No. 1 ad medium by 2011
• Radio is also expected to grow modestly in 2007, with a 1.5% increase
• Radio's predicted growth rate looks decidedly sluggish next to expected online revenue growth of 22% in 2007
• The Internet first eclipsed outdoor in 2000, when revenues totaled $8 billion, compared to $5.24 billion for outdoor

You can read more about this recent study at the eMarketer website.

Unique (Non-Traditional) Ways to Create Awareness of the Network

There are many highly effective ways to increase you network awareness within the marketplace.  Most of the methods follow common sense PR and Word of Mouth strategies.  Partnering with an agency or in house corporate marketing team can be an effective way to really get your message out to the right people at the right time.

By increasing the overall knowledge of the network you will benefit from many positive effects.   Part of getting the word out should have specific goals and objectives.  Early in the life of your network you will want to make sure to reach, with your message, potential publisher partners.  As you build you network you will be looking to get the word to advertisers and other strategic partners.

Traditional online marketing and word of mouth campaigns work well and can have immediate positive impacts on the network.   But to make the marketing very effective and ensure you are achieving your goals, there are some unique ways to announce your network to the market.

We have compiled a list of some of the creative methods that have worked effectively in the past.  Of course every market is slightly different, and the primary focus should be to understand your market before sending your message out to your market.

Regardless of which marketing approaches you utilize, remembering to control your message and focus on the objectives and goals is critical to your overall success.

The following are six unique ways to create additional awareness of your network:

1. Leverage Forums or Blog Comments – Comments and forums are a great way to achieve links to your website. In most blogs or forums you are allowed to have a signature and in your signature you can put a link to your network.  Focus on forums or blogs that are relevant to your network audience.  You will drive interested parties to the network as long as you are contributing to the discussions in an intelligent and respectful manner.  Additionally, you can gain in SEO benefits by having hard links to the network website on these topical sites and blogs.

2. Submit to Search Engine Directories – Search engine directories are a good way to get a topical and free link to your network website.  Beyond the typical SEO benefits, you will reach the target audience that is interested in your category.  Make sure to list your network as a directory of high quality sites and blogs in the category of the directory.  Most search engine directories allow you to submit to their website for free. This will allow you to increase your web presence by being listed on the big search engines, and it will also be a free link.

3. Buying Targeted Keywords – As with any online marketing there is potentially value in buying specific keywords around your category and online advertising.  If you are building a network in the finance space, you would want to look at keywords such as: Financial Ad Network, Financial Blog Network, Advertise on financial sites, etc…  You will want to test out many combinations of these keywords, but the idea is to reach a potential advertiser or publisher via contextual links.

4. Build and Publish a Network Blog – Creating a blog around your network is a potentially great way to create awareness.   Post about topical issues and/or discussions within the blogosphere and make sure to link to all the top blogs in your category.  Sites will be interested in the new blog that is linking to their site.  Make sure to push your blog content out to the appropriate search engines and article submission directories.

5. Category Breaking News (Viral Marketing) – Leverage your position in the category to push out interesting and compelling content around the vertical brand.  Find content that is unique (create the content of leverage your publisher relationships to acquire the content).  By getting the unique information out in the market, the viral effect will take off, and it will drive awareness in the category.  Most bloggers and websites that are in your category will be looking for this unique content to publish, and by pushing it out under your new network brand you are creating awareness in a way that offers value to potential partners.  For example, if you were building a network around parenting, sending out an viral email or video around new ways to protect your kids on the playground could drive interested bloggers and publishers to come and want to post around this unique information.

6. Links from Related Websites to Network Directory – Building out a directory of all of the sites in your network is a great resource for consumers in your target audience.  Identifying highly relevant sites to link to the network directory will drive traffic to your network partners, while also increasing the overall search ranking for your network and network sites.   If consumers in the category start to rely on the directory of your publisher partners you will receive true interest from advertisers in this category.

Your network presence and awareness is critical to your long term success.  You will leverage traditional methods to create the awareness, but sustaining the awareness in the market will be the difference between a small niche network and a high caliber high quality vertical co-op.

The network is a living thing, and you have to continue to feed it in the market.  The effects of continual reinforcement of your network brand and identity will only have positive effects on your network and all the member sites and blogs.  It is a true win-win situation for all.

Building Vertical Ad Networks...

Though the technology and service is out there to make life easier, there is still an ongoing Chicken and Egg problem between Publishers and Advertisers...