E-BUSINESS SPECIAL REPORT

The Role of Content-Based Advertising

At last week’s Search Engine Strategies Conference in San Jose, California, it became clear that search engine providers are seeking new ways to leverage their advertising listings. The most recent development in this area is called “content-based advertising,” in which search engines serve advertisers’ listings to publishers of specialty content on targeted Web pages.

In other words, if a site is dedicated to baseball history, its owner might sign up with a content-based advertising program to provide a baseball-oriented ad on the site. If a user were to click on the ad, the site owner would earn money — and so would the search engine that served the ad to the site.

However, content-based advertising is still in its infancy. Google launched its AdSense program in March, while Overture’s Content Match debuted at the end of June. In contrast, Sprinks, a division of About, Inc., beat both search engine giants by launching ContentSprinks in October 2002.

These and other companies are racing to sign partners in what is still a largely untested market, seemingly confident that this online advertising method has significant growth potential. In fact, Paul Volen, Overture’s vice president of partner product marketing, told the E-Commerce Times that the overall market for content-based advertising will generate US$2 billion in revenue by 2008 (*correction).

Given that Overture’s present revenue for its new content-based advertising service is zero, according to Volen, is such a prediction realistic? What role will content-based advertising play in the future?

Advertiser Interest

IDC research manager Jonathan Gaw told the E-Commerce Times that this relatively new offering is an outgrowth of the sponsored-links notion previously popularized by Google and Overture.

“It’s the flip side of the same coin — selling advertising search terms in a given context,” Gaw said. “Sponsored searches have done tremendously well. Now [content-based advertising] offers a way for larger advertisers to reach out to niche publishers that otherwise would be too time-consuming to consider.”

Volen told the E-Commerce Times that his company entered the content-based ad space because its advertisers wanted more qualified leads and additional traffic. Content Match provides those advertisers with greater monetization than they would get with banner ads.

“It offers them a tremendous opportunity to diversify their revenue stream,” he said. “That in turn will make them happier and [encourage them to] spend more money with us. It’s a great circle of revenue.”

Including the Little People

Content-based advertising also may prove to be a revolution for small Web publishers because it offers them a chance to get the attention of major players, Gaw said.

“It’s growing the market, bringing in people who previously wouldn’t have been able to play in the first place,” he noted. “The cost and setup [of a strong advertising arm] was too difficult and daunting.”

Kurt Abrahamson, director of content media at Google, told the E-Commerce Times that his company’s AdSense program offers dynamic, scalable solutions for Web publishers, regardless of size.

In June 2003, he added, Google expanded AdSense to offer a self-serve option that lets small Web publishers sign up online. He said the program offers generous revenue share terms with Google and enables small publishers to earn more revenue in addition to providing targeted advertising content.

Search Still King

However, content-based advertising is not the be-all, end-all of the online ad market of the future. For example, although Volen said Overture expects the content-based ad market to be worth $2 billion in five years, the company also believes the overall paid search business will bring in four times that amount.

Likewise, Denise Garcia, principal analyst of media and advertising at GartnerG2, told the E-Commerce Times that traditional search will remain king of Internet advertising because of its directness.

She questioned how effective content-based advertising will be because it fails to differentiate between those who are seriously considering buying a mountain bike, for example, and those who are casually checking out a Web site’s content.

In contrast, advertisers can more reasonably assume that someone who types “mountain bikes for sale” into a search engine is considering that purchase, Garcia said.

However, Volen disagreed, saying content-based advertising works similarly to traditional advertising in its analysis of Web site demographics and its subsequent determination of which ads might interest site visitors.

Is this new approach a recipe for booming business? Time will tell — and search engines are already placing their bets.

*Editor’s Correction Note: In the original version of this article, we incorrectly stated, “Paul Volen, Overture’s vice president of partner product marketing, told the E-Commerce Times that his company, which was acquired by Yahoo two weeks after launching Content Match, predicts the service will generate US$2 billion in revenue by 2008.” In fact, the company predicts the overall market for content-based advertising will be worth $2 billion in 2008.

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