August 30, 2003

Web search companies have hyped their new contextual services as the next big thing in Internet advertising, but early results by online marketers show those new ads may be underperforming expectations.

Some consultants overseeing Web ad campaigns are telling clients to proceed cautiously when considering contextual ads, which are served to news and information Web sites when certain words appear in content. They say the ads can perform more like banner ads -- the humbled, old next big thing of the bygone dot-com boom -- than the lucrative search ads that inspired them.

That could be bad news for companies like Google Inc. and Overture Services Inc. , which hope contextual products will boost revenues and their importance to advertisers. "The results we saw from our contextual ad campaigns looked less like search marketing and more like banners," said Brad Byrd, business development director at NewGate Internet, a Sausalito, California, search marketing agency.

Reprise Media's Joshua Stylman said contextual campaigns can be very effective if managed well, and added they can outperform the targeted search ads that have vaulted Google's and Overture's sales into the billion-dollar range. But Stylman and Byrd both said the search companies need to match contextual ad pricing to effectiveness. The marketers also said the companies need to make contextual ads easier to track and manage separately from search ads.

Stylman said Reprise currently is "opting out of Google and Overture's contextual products for most of our campaigns." Representatives from both search companies said they're still gathering information about their contextual products, which were launched as recently as six months ago.

"We're learning a lot about this business and how it works for advertisers," Overture vice president Paul Volen told Reuters. He said the company is refining and enhancing its product, but he declined comment on pricing. Pasadena, California-based Overture is currently being acquired by Yahoo Inc.

Overture and Google get much of the credit for reviving the Internet advertising market after demand for banner ads imploded in early 2000 due to big cutbacks in dot-com spending and a perception that consumers were generally ignoring them. Their search services deliver ads when Internet users search via key words. The ads look like search results with links to Web sites, but are arranged under special headings.

Contextual ads use the key word technology from search to dish up ads on content sites. Despite the fact that fewer Internet users are clicking on such ads, advertisers often pay the same for key words used in both search and contextual ad campaigns. A study from NewGate compared the performance of Google search and contextual campaigns for two clients. Results showed that click-through rates were 14 times to 150 times higher on the search ads than the contextual ads. The cost per lead, or order, was two to eight times higher for contextual campaigns.

"The picture painted (by the study) is one perspective, but it's far from the only perspective out there. Ultimately, we'll do what's right for our customers and advertisers," said Kurt Abrahamson, Google's business manager for contextual ads. But marketers, too, are finding difficulty in predicting where contextual ads will land because often they can be linked to words in rapidly changing news stories.

In one recently publicized example, Mountain View, California-based Google served a luggage ad with a New York Post story about a murder victim whose body parts were found in a suitcase. Still, some users are sticking with Google and Overture.

Mark Aistrope, president of Ohio-based Meeting Tomorrow, which sends LCD projectors to business travelers, said he would like to pay less for his contextual key words, but added that so far he's happy with the results. "It's good to have them out there. There is a branding element to what we're doing," he said.

Source: Boston Business.com

        

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