The Hidden Truth About Online Advertising Revenues

In my role I get to meet literally hundreds of online content publishers every year and the question I’m most frequently asked is:”Should we give our content away for free and make our money from advertising, or should we charge people to get access to our content?”Our answer is always the same.”If you can make as much money giving your content away for free and selling advertising space against it, as you can make from running a paid subscription website, then go the free content route. It is simpler”. However for 90% of specialist information publishers they will never make as much from advertising revenues as they can from subscriptions and these are the reasons why.Reason #1 – We Only Hear About the Headline Advertising FiguresAnyone vaguely involved with the internet will frequently see figures being quoted about the size of the online advertising market and how quickly it is growing. But rarely do we see a breakdown of how these revenues are distributed. So here it is:72% of all online advertising revenues go to just 10 companies95% of all online advertising revenues go to just 50 companiesThat leaves just 5% of the remaining revenues being distributed amongst tens of thousands of websites which are trying to make money from advertising. And amongst this group who have to pick up the scraps off the rich advertisers table are many big international publishers. They are taking a big chunk of the remaining 5%!To put some numbers around these facts:In the US 5% of advertising revenues in 2005 was $620mIn the UK 5% of advertising revenues in 2005 was £40mThese are not big figures when you take into account how many thousands of websites are trying to get a piece of the action.Reason #2 – Advertising is Driven by Traffic VolumesThe second reason is, like it or not, online advertising revenues are still largely driven by volumes of visitors to a website. The typical rates are $8/£5 per thousand pageviews (even for Adsense). To make $100,000 or £60,000 in revenue you would need to be getting over 34,000 pageviews a day on your website.Successful specialist online publications typically rely on having a low volume of highly interested and loyal readers. This does not suit a volume driven advertising model.ConclusionThere are only two ways of making money from content on the web. Free with advertising, or paid for access. Advertising is volume driven so does not suit niche sites with low numbers of loyal followers. Therefore content owners have one alternative and that is to charge for the content. They can do this as one off downloads or provide access to content on an ongoing basis for a subscription fee.

Advertising on the Internet

Advertising is an attempt to disseminate information in order to promote products, services or ideas and affect a buyer-seller transaction. There are various mediums of advertisements and each medium has its own attributes. The advent of Internet and its growing penetration has enabled this medium to emerge as an important platform for advertisement. Since Internet users are well educated with higher levels of income, they are becoming a desired target for advertisers. Moreover, studies suggest that three-quarters of PC users are giving up some television time and that works in favour to the companies that are opting for this medium.
The various channels of Internet advertisements include Internet communities, chat rooms, e-mail, newsgroups, and kiosks. Television advertisements could broadly be channelised through cable and broadcast mediums. One of the basic differences between these two mediums of advertisement is that the Internet advertisements could be specifically targeted to a certain group. Television, in all respects has the advantage of reaching a broader audience and is the favourite medium for the prominent companies. Other differences between the two mediums as platforms for advertisement is that the Internet advertisements are frequently cheaper, could be updated any time with a minimum cost and these can use efficiently text, audio, graphics, and animation in comparison to television. The boom in high-speed Internet service has fuelled the growth of ‘rich media’ or multimedia advertisements that incorporate motion and sound. They include full-page ‘screen stealer’ ads you cannot avoid, banner ads that expand when you slide your mouse over them, and tiny icons that zip from nowhere across your screen. The rich media ads are fuelling a recovery in the online advertising market, and may reflect a major step for the Internet in joining the mainstream media. The ads are now becoming more like those on television.The advertisements of the two media provide in-depth, detailed information that suits their users, such as infomercials on cable television and click-through ads provided by the Internet. It happens that for most consumers, enough information for a product is a motive for trusting and buying a product. Both the media – television and the Internet offer instant information services and customers get a chance to not be bothered by a salesman as they walk into Best Buy looking for a commodity or consumer good. The basic difference between the two media on this point is that cable television advertisements are still under the control of cable television institution and advertisers for how much information they would like to offer due to the limited time arranged for each commercial. However, Internet users can take their time as long as they need to collect information if they are willing to pay for getting online.But, it must be remembered that the effectiveness of advertisements of the two media depends on consumer’s needs and desires to buy. The selling of products on these two media becomes entertainment for people, not responsibility, such as cable television’s pay-per-view programming and home shopping channels. For the Internet there are the web sites that sell books, computer and CDs. It is not like the other media that force people to be exposed in a specific advertisement and buy a product they don’t even need.
Finally, the Internet advertisements, packed in funny or an enjoyable game could be displayed through the web but there is a possibility that it would never be showcased on television because of censors. For example, Mazda UK recently made an internet-only ad, called “Parking”, which it screened on its site. This advertisement could not find its way on the television screen because it was against the censorship rule that states, “Vehicles should not be depicted in dangerous or unwise situations in a way that would encourage irresponsible driving”.Banner advertisement is the most commonly used form of advertising on the Internet. These are graphical images that could be static, animated or rich media. These form of advertisements are very popular on the World Wide Web because through these advertisements, huge chunk of online traffic could be channellised to the advertiser’s web page. One of the other advantages of using banner advertisements is the convenience of getting them customized. Apart from increasing traffic to a web site and sales of the product or service, banner advertisement persuades people to remember the name of the advertised product or service. Banner advertisement can inform the prospective clients about the product or service.