With the rise of online advertising (now worth 10% of the $10 billion Australian advertising market), we discuss strategies your website can employ to earn money through online advertising.

3 Fundamentals of Online Advertising

First a refresher. There are 3 basic ways to advertise on a site: 1) Cost per 1,000 impressions (CPM), 2) Cost per Click (CPC) and 3) Sponsorship

Cost per 1000 impressions (CPM): This is the amount charged to an advertiser per 1000 views of an ad. Rates generally range from $30-$50 per 1000 impressions.

Cost per Click (CPC): This is when charges are only accrued when a user click on the ad which takes them to your website. Rates for these generally range from a few cents to a couple of dollars. This sort of advertising is popular with search engine companies.

Sponsorship: This is generally based on a finite time-period (e.g.. for a fantasy sports competition) or for a specific event (e.g. an email campaign to your customers). Generally, these are secured through your existing business relationships or managed via a PR/advertising team.

(UPDATE: Google have just announced a trial where advertisers only pay when a specific action is undertaken online. For example, you only pay when a customer who clicked on your ad then goes and purchases a product or submits a contact request. Read here for more details.)

4 Online Advertising Revenue Models

1. Share Advertising Revenue with your Contributors

The big trend that is generating a lot of interest is consumer generated media served from a central, well-branded website. Think YouTube, MySpace, Facebook and Flickr. These are sites that de-centralise (some say democratise) the process of creating content and placing the power back into the hands of the individual. This process is important because it is incredibly popular. Being popular means happy advertisers.

But what of smaller, niche sites such as blogs and forums? How can they compete with the big boys? As we have mentioned previously in our technology reviews, content is king. Focus on getting the right content for your audience. High quality content gets you loyal visitors. A niche market means that advertisers can target their message carefully. Focus on getting high quality content for a niche audience and advertising will follow.

So it begs the question – “How do I get great content?” One way is to pay experts to write about their industry, or build a great brand (see our article from Pandemonium for tips) that attracts experts. The other option, which offers some promise, is sharing advertising revenue with your writers. This is where YouTube, MySpace and blogs will head in the future.

Sharing advertising revenue with your writers/contributors works like this. Assume you have advertisement running on your website and you are using a cost per 1000 impression (CPM) model (See earlier discussion on CPM). Now, when a visitor reads, watches or listens a contributors’ content, the ad is displayed next to it. In normal run of events 100% of the ad revenue from that ad goes to the website operator. In the ad revenue share model, a cut (say 20%) will go to the contributor.

The great thing about this model is that it is self-correcting. A popular contributor will be encouraged to continue submiting more content because they are getting rewarded. A less popular contributor will be discouraged as they are not relating to the audience. Thus, the “cream rises to the top.” and thus improves your website’s popularity with your audience.

2. Podcasts

Advertising strategies for podcasts are more or less borrowed from their traditional media counterparts, radio and TV. Typically, short ads (less than 30 secs) are inserted into the start of a podcast. Again, subscriptions to podcasts can be tracked although it is a little harder to actually know how many people listened to it (SONAR recently released a media player that can track this sort of information).

3. Really Simple Syndication (RSS)

Really Simple Syndication (RSS) gives users the power to subscribe to a website’s news, new articles and new content. For example, this blog has an RSS feed. RSS feeds can be sent to a dedicated RSS Feeder (such as FeedDemon) or viewed on your personal Yahoo/Google homepage. It’s a great way to keep in touch across a number of websites without actually having to visit them – which is why they are very popular. Now this could be a website operator’s worst nightmare as the number of visits to your page could be threatened by this technology. However, RSS feeds can have advertisements embedded within each feed, thus providing a extra source of revenue. New ad service companies, such as FeedBurner, help website operators to embed advertisements in their feeds.

4. Google Adsense vs Yahoo! Publisher

One cannot talk about online advertising without discussing what the big players, Google and Yahoo! are up to. For the uninitiated, Google have a system to help customers earn revenue on their website, called AdSense. Google AdSense automatically serves advertisements (by you placing a small bit of code on your website) and will automatically display ads that are relevant to your website. When a user clicks on an ad, you get a share of revenue and Google gets a share.

The online world has been waiting for Yahoo!’s response to AdSense. Yahoo! offers an invite-only, BETA system called Publisher Network.

It is worth considering Google or Yahoo! Services to manage your advertising on your site. It’s very easy to set up either service and requires little management overhead.

Last Word

Using a mix of the above online revenue models can boast your site’s earning potential. But as with any media, it is important to understand who visits your site. How many unique visitors per week? What locations (country, state, city) do your visitors come from? What are the general demographics of your visitors? These are the basic questions that any advertiser will want to know. Create a media pack with all of your demographic information, rates and technical (size, format etc.) specifications. Make it as easy as possible for an advertiser to say “Yes” to advertising on your website.

This article provides 4 predictions of where search is headed and how it will add to the user’s search experience.

1. Corporate Search

Generally speaking it is easier for people to find information on the web than it is on their own corporate intranet. Finding the right documents and information quickly and without having to trawl through various directories and database is a must. We will continue to see companies battle it out in the corporate sector. Not surprisingly, Google, have an enterprise solution where a Google-designed server is simply plugged into the intranet and goes to work indexing documents. Two industry heavyweights, IBM and Yahoo! have teamed up to introduce OmniFind, a software-based enterprise search solution to compete in the corporate market.

1. Location, Location, Location

With the rise of mobile phones, wireless hotspots and GPS, users will demand location-based search. Although we are in a globalised economy, people are yearning for that sense of local community. Look out for the major search engines to push “local search” (Eg. Yahoo! Local). Also watch out for mobile enabled search with the capacity of searching local businesses and even “finding a friend” in a crowd.

Sensis.com.au claims to enhance their search by integrating their Yellowpages, Whitepages, CitySearch and TradingPost assets to serve up local results. Businesses will be (and already have) begun to take a localized approach to advertising, rather than a “shot gun” approach characterized in the early days of online advertising.

1. Business Linkages

Have you ever tried to find a business partner via the web? Currently, search engines allow you to find companies, but not the right person in that organization to contact. This is where search and social networking will merge. So in the future, we will see a lot more business linkages between key decision makers within companies. A great example is LinkedIn, where you can search through and get introduced to a range of professionals from around the world. It’s not one big marketplace, where anyone and connect to everyone. You still will need to use your online network to establish contacts, just like you would in the physical world, to facilitate business connections.

1. Video and Podcast search

With the emergence of multiple forms of media out in the web, consumers will demand easier search of non-text based information. There are search engines that specialize in video and podcasts but they only search the “meta-data” (that is, information, tags and categories that accompany the media). Future research will focus on the search of the actual content of the media, by analyzing the media stream, extracting relevant information and keywords, index it and make it searchable. If this is achieved, this will help both the producers and consumers of content to connect to one another.

Final Thought

Humans have and always will need information. We will always place a premium on finding it. But let us not confuse information with knowledge, nor wisdom for that matter. Knowledge and wisdom will continue to remain the defining human advantage over machine. So be it.

This article gives a basic overview of how search engines work and tips to improve your ranking.

Yahoo!’s original strategy

In the beginning, Yahoo! started as a student hobby by David Filo and Jerry Yang, who in 1994 decided to keep an online list of interesting websites. As their list grew, they decided to put those links into categories, and sub-categories, and so on. This is important as this dictated their general approach to advertising – businesses pay to be listed within a certain category. Think of early Yahoo! as the YellowPages of the Internet world. Over time they developed search algorithms to trawl their listings (and then the web at large) for interesting websites.

Google’s approach

Like Yahoo!, Google was spun out of Stanford University by two PhD students: Larry Page and Sergey Brin in 1998. Their approach was to not to categorise websites but to rank them based on their popularity. On a basic level, website’s popularity is based on how many other websites link to them. So the more your website is linked by others the more popular you are and thus your website will be ranked higher than others.

As Google’s search engine evolved, their algorithm ranked “main stream media” websites (eg. News.com.au or cnn.com) as having higher quality content. So if your website is linked from these high quality sites, your ranking improves and you start to shoot to the top of Google’s search rankings. User’s found that Google’s method of indexing and ranking websites extremely useful in getting to relevant information on a consistent basis.

How do you get onto search engines?

There are a number of strategies to improve your website’s “popularity” ranking on search engines.

1. Content is king

Many people focus on “tricks” to fool search engines. Your primary strategy is to continually improve your website content. Make your content so interesting and so compelling that other website operators and bloggers want to link to you.

1. Write articles for the main stream media.

This is easier said than done. But take any opportunity to write opinion pieces or give interviews to the main stream media. Get them to provide a link to your website. The search engines will give your website a boost.

1. Participate in online forums

Find online communities in your areas of interest. Participate, but don’t “spam” your message. Make sure your website or business solves a need that is being discussed in the forum or blog.

1. Meta data

Make sure that you include meta data and meta tags to your website. This “meta” information helps search engines understand the content of your webpage and thus helps connect searchers to you. Ask your website operator to make sure that these are up to date and relevant to every page of your website.

1. Free press releases

There are a number of free press release services out there. Do a Google search for them. It’s one way to promote your site and getting links to your site.

What is social networking and how is it different to a plain old fashioned website?

Social networking is the new hot trend at the moment. Have you ever thought of YouTube and MySpace and thought “what’s the deal?” Many people ask why these website are gaining so much attention? The short answer is that new web technologies and almost ubiquitous Internet connectivity has allowed users to experience the web in a whole new way.

These websites are getting mainstream press coverage, in part, because of the massive deals that are being made. More eyeballs are now turning away from traditional TV, print and radio media.

But what is so different about social networking?

A social network is defined by wikipedia as:

A social structure made of nodes which are generally individuals or organizations. It indicates the ways in which they are connected through various social familiarities ranging from casual acquaintance to close familial bonds.

Note that there is no mention of technology in this definition. Having a strong social network has been a competitive advantage for humans to survive and thrive. Connecting with one another is still a basic human need. As we all know, networking in business is vitally important for professionals for career advancement and for companies to sustain their profitability.

A social networking website facilitates the connection between people. (In the strictest sense, dating websites are commonly considered to be the first social networking websites). It’s about connecting with your friends and colleagues online and new web technologies are the tools facilitating social networking websites. Traditional website tend to contain static information and maybe a blog and a forum; they do not actively try to create linkages between it’s members.

Social Networking Examples:

MySpace

MySpace allows people to connect and share information, in multiple formats and structures, news etc. with their friends and extended networks. There are over 100 million users of MySpace globally (predominantly teenagers and young adults). It gives you an insight into the “future generation”, how they know interact with people in the virtual world and how they expect to interact when they enter the workforce.

LinkedIn

LinkedIn targets professionals looking to connect with one another to explore business development opportunities, jobs and investment opportunities. It works off the principle of “6 degrees” of separation. Your contact details are only exposed to those that you invite into your network. Example: Imagine if you are a Business Development Manager looking for a lead within IBM. You can then use your contacts within LinkedIn to see if their contacts can help find a contact within IBM. If you were a member of LinkedIn with 50 direct contacts – this means your social network is now estimated at 1 million people.

So can your business benefit from a social network website?

Here are a few questions to consider:

• Do you need to build a community with your customers to foster brand loyalty?
• Is it beneficial for your customers to network and connect with each other?
• Are you trying to build a distribution/sales channel with outside parties?
• Does your business need to link to, disseminate and utilise information content?

If you have answered yes to any of the above questions, then consider a social networking site. You can either create one from scratch or become part of an existing one – eg. LinkedIn, MySpace or one that is focused on your particular industry, and linking you to the people, networks and content you need to grow your business.

Social networks are nothing new. It is and always will be the lifeblood of business. By coupling the need for connections to information, networks and resources with new technology, social networking websites have the potential to open up business opportunities, new partners and new markets.

Do you have problems sharing knowledge across your business development team? Are you trying to build a community around your product?

What is a Wiki? In a nutshell, a Wiki is webpage that allows any one to change the content of that webpage immediately via their web browser. The best known example of a Wiki is wikipedia.org where registered users (anyone with a valid email can register), can submit new topics and edit existing ones.

In a non-wiki environment, generally one person is charge of website content. If another person wants to add or update information, he or she would have to go through this gatekeeper.

In the Wiki model anyone can directly change the content of a page – all through their standard web browser.

Scenario 1 – Sharing leads among your business development team.

Sales and Business Development are the lifeblood of any organization. Being able to work together as a team to secure new customers and retain existing ones is necessary to sustain a competitive advantage. One possible application is to use a Wiki like a virtual whiteboard. Each Business Development team member can add their opportunities and/or client facts to a client page. Once this page is updated, the entire team can now have access to this knowledge.

Scenario 2 – Building a community around your product or service

In today’s online world, users expect to find customer support and product information easily on the web. This means generating a lot of content. A better way is to get your customers to do it for you. A properly structured Wiki can enable your customers to add advice, create tutorials, create “Getting Started” guides and suggest product features. For example, GarageGames, a company that creates software for independent games developers, has a Wiki for customers to contribute tutorials and advice for the community. Another simple example, is Mick’s Wiki, a place where kids can contribute to ideas for a video game. In conjunction with blogs and forums, Wiki’s are just another way to integrate into clients and help customers feel part of the brand.

Scenario 3 – Internal documentation for your product development team

Creating and protecting technical documentation within a team is always a challenge. Usually you will have one “content manager” in charge of developing and releasing relevant documentation to the team. Wiki’s can help “democratise” this process by allowing programmers, team leaders, contractors to contribute in controlled space. There is only one document only one current version.

Who’s in control?

One big question for managers is “How do we control the content?” There are a number of ways:

• “Watch List”: anyone, including administrators, can watch a particular page. If objectionable material is posted you can always remove it.
• Banned Users/IP Addresses: if you have a habitual abuser you can block them from editing your Wiki.
• “Protect”: Administrators can protect a page so that only authorized users can change its content.
• Access Control: some Wiki’s allow you to restrict content based on group privileges. This is useful in a corporate environment where keeping information separate between business units is a requirement.

Knowledge Sharing Culture

One final note. While Wiki’s, (or forums, or blogs for that matter) are useful, they cannot by itself create a new business environment. For Wiki’s to succeed, your team must be committed to a knowledge sharing culture. An environment where people are encouraged for sharing information and wanting to help others. Only then will Wiki’s provide valuable communication functionality for your business.

A global niche market – is that a contradiction in terms? Not any more. All over the world entrepreneurs are able to sell their products to niche markets using search engine marketing – Google and Yahoo! predominantly. This is known as 7 sigma marketing, targeting the “tail end” of a market.Specializing in a niche market was once uneconomical as distribution channels were rigidly defined – manufacturer to the wholesaler to the retailer to the consumer. While many claim that the internet has opened up an alternative global distribution channel to consumers – that is only part of the story. Search engines companies, such as Google and Yahoo! were able to filter the vast amount of information on the web and present it to the user. People searching for information on medicines, cars, duck shaped soaps, vespa coffee mugs, calendars from the Vatican or anything were presented with ads that matched their search requests. This allowed niche players in the market to efficiently target a global audience in a cost-effective way.

While this all sounds good in theory how can you get your product out on the global market? Here’s a rundown on how to get started with Google and Yahoo!

How cost-per-click advertising works

When a customer clicks on an online ad (which directs the customer to the advertisers webpage), the advertiser is charged by the website owner. The amount that is charged can range from a few cents to tens, even hundreds of dollars. The main benefit of this sort of advertising over traditional advertising is that you can efficiently target your niche market plus be able to track your return on investment on your ad campaign.

Where does your ad get shown?

All of your ads will be associated with a particular keyword. So when a user types in your keyword in a search engine (eg. Google or Yahoo!), your ad appears. Larger search engine companies also have vast affiliate networks – so your ad may appear on other websites too!

Advertising on Google

I have taken the liberty of using Google’s generic step-by-step guide and adding a few tips along the way.

1. Choose your target customers.

Google allows you to target specific countries and languages.

TIP: Make sure you have the ability to deliver your products/services to these markets and have an understanding of local taxes, currencies and postage costs. Plus think about creating a website in other languages to capture more markets!

2. Write your ad copy.

Since Google ads are all text-based, you need to come up with a short concise description of your product/service.

TIP: Be as specific as you can. If you have more than one product to sell, create separate ads for separate products with separate keyword (see step 4) – don’t create an all encompassing generic ad.

3. Put in your website link.

This is where the customer will land when they click on your ad.
TIP: Make sure you link directly to the product information page not your generic home page. Customers expect to get to information quickly! So don’t direct them to a page where they then have to search around to find further details about your product.

4. Assign Keywords to your ad.

When a Google user types in a keyword in the search engine, your ad will be displayed on the right-hand side of the search results.

TIP: This is a critical step. Spend some time putting yourself in your customers shoes – what does your product or service solve? What type of information might your customer is looking for that relates to your product? What type of words would they enter? Be as specific as possible – you will get better, more cost-effective results.

Choose your currency that you want to pay Google with.
TIP: You can’t change your currency once it has been set.

5. Set a maximum cost-per-click.

The maximum cost-per-click is the maximum amount that you want to pay when somebody clicks your ad. In general, the higher you are willing to pay, the higher position your ad will be on the search results page.

TIP: use the Google “View Traffic Estimator” it will give you a good idea where your ad will be positioned and the likely cost-per-click. Use this to fine tune your keywords and ad budget.

6. Set your daily budget.

So that your online ad budget does not get out of control. You can set a daily budget. Once your daily budget has been reached your ad will not be displayed until the following day.
TIP: Keep track of your daily budget. If you keep hitting your daily budget – think about raising it to capture more clicks to your website

7. Monitor.

It’s unlikely that you will get all of your keywords, costs, budgets etc right the first time around. Google allows you to monitor the performance of your ad campaigns online and allows you to make adjustments as necessary.

TIP: Pay particular attention to underperforming keywords – try to choose specific rather than general keywords.

Advertising on Yahoo!

This time I have used Yahoo! UK’s step-by-step guide. Yahoo!’s process for setting up advertising is quite simlar to that of Google’s. I personally find Google’s process much more user friendly, but Yahoo! have actual human editorial staff that go through your ad and can make suggestions to you to improve your ad’s effectiveness. The other great thing about Yahoo! is that your ads will also appear throughout Miscrosoft’s MSN web portals.

1. Select your keywords.

Choose your keywords. Yahoo has a Keyword Assistant Tool to help you out if you get stuck.

2. Write descriptions with keywords.

TIP: Keywords in your description will mean a better click through rate to your website!

3. Create your budget and payment plan.

Yahoo! utilises a pure auction bidding system. You can see a list of your competitors bidding for your keywords. You can then decide how high you wish to bid – the higher you bid the higher your position! You can also set up the maximum daily budget so that you can effectively control your online ad spend.

4. Editorial review.

Once you have submitted your ads a Yahoo! editorial team will go though your ad and make recommendations. This is a great service, especially for novices.

TIP: Take their advice!

5. Monitor.

As with Google, Yahoo! allows you to monitor your ad effectiveness online. Keep track of your ads and keywords, particularly underperforming ones!

Conclusion

By adopting a two pronged strategy using Google and Yahoo! online advertising you can develop a 7 sigma marketing strategy.

Good luck getting your niche global!

Lee, a 14-year old student, is sitting in her bedroom late at night with her broadband connected PC. She fires up her software which continuous scans the Internet for her favourite song as she’s chatting online with her friends. The software finds what she is looking for and prompts: “File found: Download now?.” Lee smiles (she’s been looking for this song for a while now) With a click of the button, Lee begins to download her song for free and within a couple of minutes has her song on her computer and synchronised automatically with her iPOD. She says goodbye to her friends online and jumps into bed listening to her newly downloaded song. As she falls asleep, she leaves a download running of a movie that was recently released on DVD and not even available in Australia yet.

Lee is part of the Download Generation. She feels no guilt and no shame in consuming digital music that is freely available on the net. So what are the tools of the trade that the Download Generation use to get access to free digital content?

P.O.F.G.S. (Plain-Old-Fashioned-Google-Search)

Performing a Google search for “Free music” or “free software” can result in some fairly interesting links. However, IP lawyers representing copyright holders continually scan the Internet and will aggressively pursue the owners of illegal sites. Obvious problems with this is that these site owners are created off-shore with minimal legal protection for copyright holders.

Peer-to-Peer

A peer-to-peer (or P2P) computer network is a network that relies on the computing power and bandwidth of the participants in the network rather than concentrating it in a relatively low number of servers. This means that rather the file exists on a central server, they are shared amongst the participants of the network. The file is broken into small chunks of data and shared. So in the case of Lee, as she downloads these chunks of her music file, they are automatically uploaded directly to other computers who are also interested in the same song. Once she has finished downloading the chunks are re-combined and ready for use. BitComet, LimeWire and Napster are the more common software on the market that utilises P2P networking.

Key Generator Cracks

Software programs generally ask the user to a key to verify that you have a legitimate piece of software. This key can be generated (“KeyGen” in Internet slang) by combining two or more bits of information (say the serial number and customer name) into an algorithm that spits out the code. The code is then transmitted to the publisher’s central server to acknowledge that a legitimate copy is present on the user’s machine. Unfortunately, as with all codes, they are crackable. A downloader can look up so-called KeyGen cracks and break it so that it emulates a legit piece of software.

DeCSS for DVDs

CSS stands for Content Scrambling System, an encryption used for movie DVDs. Since 1999, DeCSS was created that breaks the CSS encryption and allows the reading of movie DVDs. Why is this significant? This feeds the belly of the Download Generation. Cracking the CSS code means that DVD quality movies can be downloaded over the net. In Lee’s case, she just has to download a free DVD movie player and she can watch the latest releases on DVD on her PC.

Apple iTunes

All is not lost however. Apple have announced that 1 billion legitimate songs have been downloaded worldwide through their online iTunes store. This shows that there is a market for people who want to legally download their songs. It is only a matter of time that DVD-quality movies, games and software become legitimately downloaded. Part of the reason why iTunes is so successful is that it easily integrates with Apple iPods. The other stems from the fact that Apple have developed their own Digital Rights Management tool that constrains the songs use. For example, users are not allowed unlimited CD burns of playlists, or to play the songs on more than five computers within 24 hours. However, they are allowed to copy the songs to an unlimited number of iPods (Source: WikiPedia). Apple’s Digital Rights Management makes it attractive as publishers have some level of control on the distribution of their music.

Conclusion

There are a number of ways that the download generation can consume, legitimately or otherwise, digital media. The key for content providers is to take a long term view and examine the fundamental trends that are occurring. Children who grew up with the Internet are now in the workforce and becoming more affluent and are more comfortable in paying for goods, services and content online. Remember the Internet is the cheapest global distribution channel to get your content to your customers. Protect yourself and your valuable IP as best you can but the global wave of the “Download Generation” is just too large to ignore.