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Friday, August 01, 2003
Pay-Per-Click in all its Forms
AOL Time Warner looks to be promoting a new self-serve banner advertising system for small businesses, allowing them to advertise on major AOL Time Warner online properties using a self-serve system provided by a third-party vendor called AdVariant. The cost, says my confirmation email, is "as low as 55 cents per click."
Sound expensive for banners? It isn't, particularly. A major AOL portal competitor recently cold-called a client of mine (based on the keywords he was advertising on with Google Adwords... this would be known as "poaching") with an offer for a CPM-based banner buy in the $15-20 range on a popular keyword. Unfortunately for Yahoo, um, I mean AOL's "major portal competitor," we had a fair bit of data on what a profitable cost per click is, and tried to project the number of clicks we'd receive from this CPM-based buy. The best case scenario looked to be $1.25 per click, with the worst case being as nasty as $10+ per click. My client already knows his cost per click of 20 cents (on average) on Adwords gives him a steady but unspectacular profit, so we said no to that particular offer.
The point: it's clear that with AOL, MSN, Lycos, and Yahoo gunning directly for advertisers, the gloves are off and even seemingly-bulletproof Google looks to be in for a rough ride.
Now that the portals are aggressively pursuing the small-business, self-service advertising market, as expected they're going after direct access to the advertisers and cutting out costly middlemen.
So maybe it wasn't so bad after all that Google became a "portal," or major destination site. "Portal power" rules. Those who own the traffic will seek to monetize that traffic without giving away too much to intermediaries. It's basic economics.
Does this move signal that AOL really will consider alternatives when it comes time to renew its search and advertising partnership with Google / Google AdWords?
Posted by
Andrew Goodman
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D'oh!
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