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The IAB and PricewaterhouseCoopers released US Internet advertising stats for the first half of 2009. US Internet advertising revenues totaled $10.9 billion, a 5.3% decline from the same period in 2008. 2008 was the peek for Internet advertising in the US, with $23.4 billion in total revenues, up from $6 billion in 2002.

Search accounts for 47% of the total ($5.1 billion), up from 44% 1H ‘08. Display ads, classified listings, lead generation and email accounts for 34%, 10%, 7% and 1%, respectively. Retailers comprised the most substantial spending category, with a 20% market share.

Top 10 ad-selling companies accounted for 71% of total revenues in the second quarter of 2009.

• 11th: 25th – 11% of revenues for the second quarter of 2009.
• 26th: 50th – 7 percent in the second quarter of 2009.

• Industry revenue concentration remains high.
• Performance based pricing has maintained a strong sequential growth rate and is growing at the expense of CPM/Impression based pricing.
• Traffic is highly concentrated in the top 10 – 50 sites; everyone else is a traffic reseller.

Lead Generation revenues accounted for 7% of the 2009 second-quarter revenues or $361 million, down 10 percentfrom the $402 million (7 percent) reported in the second-quarter of 2008.

While lead generation was down for the industry, Reply! has posted over 50 percent revenue growth for the six-month period ending June 30, 2009 compared to a year ago in the Automotive and Real Estate categories, and has experienced increasing profitability over the last six consecutive quarters. Reply!’s growth can be partially attributed to its recently-launched advertiser-side exchange that efficiently allows for monetization of poorly-targeted traffic acquired from any online channel. Advertisers can quickly recover wasted online spend by making it available to buyers through Reply!’s platform.

For more information about Reply!’s success during this challenging time for the industry, read our recent press releases:Reply! Grows at Unprecedented Rate, Rips Beta Off Its Marketplace, Reply.com Brings on Board Top Real Estate Firms, Reply.com Launches Home Improvement.

Reply.com’s Marketplace and Exchange offer highly-efficient, locally-targeted consumer acquisition opportunities for large, sophisticated advertisers—as well as individual service providers—on a per-lead or per-Enhanced Click™ basis.

The full report is available here (as a pdf) and below.

IAB-Ad-Revenue-Six-Month-2009

While attending the Search Engine Strategies conference in San Jose this week, I couldn’t stop thinking about the lack of innovation in online marketing products geared towards local advertisers. Buying local display inventory is next to impossible, and buying local traffic from search engines is sloppy and inefficient. Creating local SEO pages is helpful, but is still very difficult to do in a scalable and sustainable manner. I believe the future of online marketing is in delivering geo-targeted advertising products that level the playing field for marketers with budgets of all sizes. I’m still stunned I didn’t see a single vendor focusing on geo-targeted consumer acquisition for new product launches (besides Reply!).

What really confuses me is the direction in which the major search engines are going. They’ve placed their focus on allowing consumers to find local products and services, but there’s a significant lag in allowing advertisers to profitably acquire consumers who are conducting localized searches. Why is it so hard to find consumers who are searching for specific products or services in specific geographies? Solving this problem will not only help local advertisers, it will provide more value to consumers who want to find and compare local products and services.

I consider myself to be somewhat of an online marketing expert. I manage a marketing team and a large corporate advertising budget; we’re profitable and we find creative ways to grow revenue and profits each month. I say this to set up my next point, not to gloat. My father is an attorney, and I manage his website and small advertising budget in my free time. I’m failing when it comes to delivering local prospects at a reasonable cost. This isn’t because I’m an unsophisticated marketer; this is because the major search engines are failing local advertisers. The major search engines can’t deliver significant traffic in the areas I want and they make changing geo-targets a painful process.The inflated cost for going local is disturbingly high. Simply put, online marketing is geared towards national advertisers. Local advertisers are at a severe disadvantage.

Large ad budgets understandably influence product changes and innovation for companies offering online marketing solutions, but we’ve reached a point where advertisers with small budgets need to be heard. Their needs should be driving innovation. The next wave of growth in online marketing needs to come from providing valuable products to local advertisers. This growth will help shift $10 billion in ad spend from offline to online services. I would be willing to grow my father’s ad budget if I could find a way to do so profitably, but this just isn’t the case. This means the major search engines are leaving my (and millions of others’) unspent ad budget on the table. It also means the door is open for an innovative product to sweep through this virtually untapped market.

To learn how Reply! is solving the problems with local online advertising, you can read any of the following posts:

• Reply.com Launches World’s First Marketplace for Enhanced Clicks™
• Online Marketing is Painful for Local Advertisers
• Making Locally-Targeted Advertising Simple and Profitable
• Reply! Click Marketplace Coverage & Clarifications

Tom Young
Director, Online Marketing & Product
Reply! Inc.

• Microsoft will power Yahoo Search (paid and organic).
• Yahoo! will become the exclusive worldwide sales force for both companies’ advertisers.
• Yahoo! will become the exclusive worldwide sales force for premium search advertisers.
• Microsoft’s AdCenter platform will provide self-serve advertising for both companies.
• Prices for all search ads will be set by AdCenter’s automated auction process.
• Future battles:
  • Google AdWords vs. Microsoft AdCenter
  • Google AdSense vs. Microsoft PubCenter
• Bing will be the exclusive algorithmic search and paid search platform for Yahoo!
• Appears Yahoo is exiting search in a material way.
• Yahoo expects to fully implement the combined effort within 24 months of regulatory approval (early 2010).

WOW & WOW

According to Reuters, Microsoft & Yahoo have agreed on a search alliance.  The deal should be announced within 24 hours. MSFT will not pay Yahoo the $500M-$1B upfront fee it was seeking. Microsoft AdCenter will be used to power Yahoo search and Bing will be at the core.  Of couse, nothing is done until it is done and the deal may still fall through. We’ll see.

Yahoo’s Earnings. The good, bad and ugly.

• Rev: $1.573 billion (down 13%)
• Pageviews up 7%
• Search revenues down 15%
• display revenues down 14%
• Yahoo’s net income rose 8 percent to $141 M.
• Operating income fell 17 percent to $101 M.
• Yahoo’s search advertising revenues on Yahoo-owned sites declined 15 % to $359M .
• Yahoo announced a deal with AT&T to sell local online ads.
• Yahoo mail developing an initiative around improving the ad experience for consumers. They call some of their ads a detriment that cheapens the Yahoo brand.

Well– where does that leave us… MicroHoo anyone?  according to Techcrunch, sources say a search deal is imminent. but Yahoo may be pushing for an acquisition. To me, both sides need the  search deal to create a meaningful competitor to Google.  Microsoft reports earnings on Thursday.

According to Neilsen, these are the Top 10 Search Providers for April 2009 (US Only).  Based on our internal online advertising experience, we have found that as we purchase ads from lower ranking sources, the quality decreases and bounce rate increases.

Source: Nielsen MegaView Search
*A year-over-year comparison is not possible because of a definitional change to yellow Pages Search.

According to comScore’s April 2009 rankings, here is the list of top Ad Networks.

Niche Ad Networks Emerge for Audience-Specific Targeting

As ad networks have expanded reach, a new networks surface that are targeted to pyschographics or behavioral segements.  The reach of these new ad networks are small by comparison to the above list but they are highly targeted which helps advertisers reduce wasted ad impressions.

• For example, Snap Shots Network, delivers ads to users of Snap.com’s Snap Shots. The network reached more than 18 million U.S. Internet users in March.
• Widgetbucks Network delivers contextually relevant ads through a widget, with a reach of 9.5 million.
• NeoEdge Game Network, delivers ads through games, had a reach of nearly 1 million.
• HispanoClick by Batanga (Hispanics)
• Indieclick (young influencers or “tastemakers”)
• The Heavy Men’s Network (men).

Selected Niche Ad Networks March 2008 Total U.S. – Home/Work/University Locations Source: comScore Media Metrix

 

Independent if you are buying PPC text-based advertising or display media via an Ad Network, targeting is critical.  Reply! offers precise geo-targeted and category-specific Enhanced Clicks and also provides the added benefit of equalizing quality by running consumers through a two-click process. If you are actively enaged in purchasing advertising online, check out our solution, quality and conversion metrics.  We would love to hear from you once you do.

Cost-per-click (CPC) advertising is the lifeblood of our business. We recently began testing CPC advertising across a variety of search engines and ad networks, and we immediately noticed a lower quality of traffic as compared to Google and Yahoo. Specifically, landing page bounce rates are considerably worse on ad networks and low-tier search engines.

With any acquisition source, bounce rates serve as a great measurement of traffic quality, or the ability to accurately geo-target consumers. If a high percentage of consumers hits the back button immediately upon reaching our landing page, it indicates we’re attracting (and paying for) consumers who didn’t intend to see our offering. More importantly, a higher bounce rate means fewer clicks have the opportunity to convert on page two, which diminishes the revenue opportunity.

For clicks that don’t abandon our landing page, conversion rates on page two are comparable across all sources (SEM, SEO, display, e-mail, affiliates). This means the value of a consumer who reaches page two of our conversion funnel is equal across all sources (we use “net clicks” to define traffic that moves to page two). Net clicks are important to measure because the cost of a net click accounts for abandonment rates and allows for a fair cost comparison across all traffic sources. The data below shows how gross CPC and abandonment rates factor into the cost of a net click.

Ask.com is one of the search engines we recently began testing. As compared to the bigger search engines, our bounce rates with Ask.com are considerably higher, but the gross CPC is lower, causing the cost-per-net-click to be equal. In this case, high abandonment rates are tolerable because the gross CPC is low enough to offset the influx of abandoned clicks.

We’re also exploring AOL, Miva, 7search, ADSDAQ, MarchEx, Right Media, Value Click, Quigo, Avenue A, and a suite of ad networks offering CPC advertising. Abandonment rates are high across most of these sources, but only some of the sources offer a CPC low enough to meet our cost-per-net-click targets. For the most part, the revenue opportunity across these sources isn’t high enough to justify the cost of account management, bid management, and analytics tracking.

High abandonment rates, coupled with the inability to accurately geo-target, makes spending profitably on ad networks and low-tier search engines nearly impossible for small and local advertisers. Some of the sources work for us because we can buy nationwide traffic, we’ve invested heavily in landing page optimization, and we have a team dedicated to evaluating new media sources and managing the accounts. Most companies cannot invest this depth of resources, causing them to miss out on a significant volume of traffic across a unique blend of web properties.

We provide online marketing services to small and local advertisers, and we recently began selling geo-targeted net clicks to our clients. A net click that is geo-targeted is called an “Enhanced Click,” and Enhanced Clicks convert better for our clients than their traditional traffic sources. By eating the abandonment traffic and delivering clicks in precise geographic locations, we allow local advertisers to reach consumers across a span of web properties that have historically been too cost-prohibitive to manage.

Buying Enhanced Clicks avoids the costs of SEM account management, and it ensures an even quality of traffic, regardless of advertising source. We’ve seen almost no attrition across buyers of Enhanced Clicks since we began testing, and we’re confident this quality of traffic can’t be beaten. This offering is currently available for car dealers (new cars) and real estate agents (home buyers, home sellers), and we’ll be offering Enhanced Clicks for a variety of new verticals in 2009. Visit the Reply.com home page for more information about the Reply! Click Marketplace.

According to CNNMoney.com, nearly 20% of home sales in 2008 came from foreclosed homes, with another 11% coming from short sales. What’s even scarier is the fact that home values dropped more in the fourth quarter of 2008 than they did in all of 2007. As the presence of foreclosures on the market increases, the online buzz surrounding foreclosed homes follows closely.

As a company providing online real estate information, we measure the interest of home buyers across our portfolio of consumer acquisition sources. We’ve recently seen a drastic shift in the behavior of potential home buyers–more and more buyers are searching for foreclosures, and are showing less interest in “normal” home listings. Search queries for keywords such as “bank foreclosures” and “foreclosed homes for sale” have skyrocketed across the major search engines since Q4 of 2007.

Our marketing team first got a taste of the foreclosure buzz in late 2007. We had been targeting home buyers via search engine marketing for years, with foreclosure keywords representing a very small percentage of our traffic. When Yahoo ran a news story on their homepage highlighting an uptick in foreclosure listings and a reduction in home values, we quickly saw a shift in the interest of potential home buyers. For context, we were bidding on the keyword “foreclosed homes for sale” and went from spending roughly $50-per-day on Yahoo to more than $8,000 in three hours. The shift was quick, it was powerful, and it has sustained for well over one year.

Both sides of the foreclosure crisis are feeling the impact, but to varying degrees. Foreclosures have brought hardship to many families, forcing them to explore more affordable geographies while watching their home equity vanish. But for a new wave of home buyers, foreclosures represent an opportunity to acquire homes at prices that were inconceivable just two years ago.

Our goal, as we provide an online marketing solution to real estate professionals, is to acquire consumers with the highest likelihood of completing a real estate transaction. We’re interested to see where the real estate market will turn in 2009, and we’ll continue to monitor the intent of home buyers and sellers in an effort to provide the highest quality clicks and leads to our network of real estate agents.

Originally reported on TechCruch, I found this an interesting post.  Google has launched a Digg-like voting feature to organic (free) search results.  As seen in the screenshot below, if enough people click the up or down arrows, those votes are counted and will have an impact on SEO ranking.  Google is also allowing consumers to enter comments for a search result, if you are logged in.  Adding these social features helps convert Google searchers into “logged-in” Google clients and helps them overlay an intelligent social filter.  Also, if enough people are encouraged to log-in, Google will amass a ton of knowledge about searchers and refine their behavorial and geo-targeting capabilities.

Geo-targeting has recently become an important part of our lead generation efforts because we service car dealers in particular geographies. The technology is not perfect, but it has allowed us to spend our ad dollars more efficiently as our revenue-per-lead is largely dependent on geographic location.

Our goal is to acquire the right traffic for our car dealers. We’ve approached a variety of ad networks, and no company has been willing to work with our ever-changing coverage maps and serve geo-targeted ad placements. Our only viable option has been the geo-targeting features offered by search engines. When we sign a car dealer as a lead buyer, we immediately launch geo-targeted SEM campaigns to mirror their coverage and target local consumers shopping for their products.

Although we’ve been successful at increasing revenue-per-lead through SEM geo-targeting, we’ve exposed flaws in IP location detection and a search engine’s ability to accurately serve ads in specific markets. At a high level, it’s difficult to drive significant volume through geo-targeted campaigns, and our geo-targeted cost-per-lead is considerably more expensive than our cost-per-lead across nationwide SEM campaigns.

For a case study, we chose a variety of zipcode and radius combinations and tried to generate Volvo leads in those areas through SEM geo-targeting (the same zipcode and radius combinations in which our Volvo dealers have agreed to purchase leads). The results weren’t what we expected.

To simplify our findings, we generated leads in our target markets. But only 50% of the total lead pool fell under our specified geography filters, suggesting a large percentage of our traffic came from unwanted areas. There are only two possible explanations:

1. People are interested in purchasing vehicles in areas far away from their location at the time of completing our forms (highly unlikely)
2. Search engines don’t always know exactly where each person is located, or they make false assumptions at times. Internet service providers such as Comcast and AT&T know where each IP address is located, but due to privacy concerns they cannot share everything with the search engines, placing limitations on geo-targeting (a topic for another post).

Regardless of which option we’re battling, the inability to accurately target specific locations significantly reduces our revenue-per-lead and invites wasteful spend. Advertisers need a better solution.

Serving businesses throughout the country, if we acquire visitors outside of our target geographies we can monetize the traffic and justify the expense. We’ve seen margin gains from our geo-targeting efforts, but not nearly the types of gains our financial modeling suggested under the assumption that IP location detection is 75% accurate.

Many local advertisers want to buy geo-targeted traffic, but the end result of a geo-targeted SEM campaign isn’t necessarily what they’ve signed up for. These types of inefficiencies make running profitable, geo-targeted SEM campaigns very difficult.

This begs the question—what options exist that will allow an advertiser to avoid inefficiencies in IP location technology and acquire traffic ONLY in the areas of their choice?

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