Notice: This blog is no longer updated. You may find a broken link or two

You can follow my new adventures @mikeonwine

Advertise less, make more money!

December 15th, 2008

Yahoo Research via Geeking with Greg:

In Web advertising it is acceptable, and occasionally even desirable, not to show any [ads] if no “good” [ads] are available. If no ads are relevant to the user’s interests, then showing irrelevant ads should be avoided since they impair the user experience [and] … may drive users away or “train” them to ignore ads.

What a crazy idea — what if one were to actually make more money by not advertising. It makes total sense. We’re inundated with media. Our eyes have been trained to ignore those lovely 160×600 and 300×250 size objects that we see all over our web pages — especially on social networking sites where our users spend so much time.

This fascinating paper on negative externalities further reinforces this idea:

Most models for online advertising assume that an advertiser’s value from winning an ad auction [...] is independent of other advertisements served alongside it in the same session. This ignores an important externality effect: as the advertising audience has a limited attention span, a high-quality ad on a page can detract attention from other ads on the same page.

I’m sure everyone by now is familiar with Pareto’s law — otherwise known as the 80/20 rule. Applied to advertising Pareto’s law states that 20% of impressions generate 80% of the revenue — and yes this is true for most web 2.0 properties that I have worked with. So what if we stopped showing ads on the 80% that were only generating 20% of the revenue?

Instead of showing crappy CPA offers the publisher should show either nothing at all, or some relevant site content. Show a snippet of the friend-feed, or maybe a list of ‘online friends’. Show “interesting related links”, or “new photos posted”… it doesn’t really matter. Show something that is of interest to the user. The point of the exercise is to train the user to start looking at this specific space again.

In the short term this may very well sacrifice 20% of revenue, as users who were previously inundated with ads are learning to trust those slots again. Longer term we get more user engagement which means higher rates on the other 80% of revenue. I wouldn’t be surprised if you saw a 50% increase in engagement just by showing 80% fewer ads — and that increase in engagement translates directly to higher rates and a fatter bottom line.

There are a world of other benefits too. First of all — fewer ads means happier users. It also means fewer creative issues (whether content or malvertising). The publisher can also use this as an opportunity to drive traffic from lower to higher monetized sections of the site. Eg, Myspace could drive users from the low $0.15 CPM User-Generated Content pages over to the very brandable ‘Movies’ section. And last but not least — showing fewer ads will create a sense of scarcity around what today is most certainly considered “bulk” inventory. This scarcity will help justify higher rates on the premium guaranteed buys — further helping to fatten up that bottom line.

If this is obviously so good, why is nobody doing it? Well there’s only one small insignificant problem… Publishers have no way of identifying the top 20% of impressions. You see, especially on social networking sites a huge portion of that 20% are impressions that are sold behaviorally via ad-networks and exchanges. Those ad-networks and exchanges need to see the full 100% to be able to cherry-pick the 10% that are valuable to them thereby making it quite difficult for the publisher to “not show ads” on worthless impressions. In fact, since all reporting is aggregated, most publishers don’t even realize that the majority of their revenue comes from a relatively small # of impressions.

How do we get around this? Well… that’s another blog post =).

Related Posts:

  • Nat

    It makes a ton of sense in theory. In terms of it happening in practice, one issue is the same issue we see with many other things in society (ex. not littering), is that not showing ads certainly helps “slow down” the cycle of training users to ignore banner ads, but the cycle benefits everyone in the ecosystem. By way of example, a publisher can choose to not show ads 80% of the time (and thus lose 20% of their revenue), but other publishers will also see the benefit of this sacrifice. In other words, in the publisher’s eyes, they’re giving up 20% of their revenue but other websites will be free-riding the impact.

  • Mukul Kumar

    Hey Mike – nice post. Agree 100%. I think, I know how I would do the 80/20 split. The tougher problem will be – how to fill that 300×250 box, with interesting content. Though I feel anything would be more interesting that some crappy irrelevant ad.


  • Posts about Web 2.0 as of December 18, 2008 | The Lessnau Lounge

    [...] Trends: Trend 1: Firms will try to remove redundant islands of business process and technology Advertise less, make more money! – 12/15/2008 Yahoo Research via Geeking with Greg: In Web advertising it is [...]

  • Ken Aston

    Google has been doing sort of this by showing only the most relevant ads or none above the search results (instead of on the right side).

  • MikeD

    You make a good point about ad networks needing to see 100% of the traffic to pick the 10% that generate revenue. I’d say that this 100% coverage is actually a need to do data collection rather than a need to display something.

    One issue that prevents the past generation of behavioral targeting networks from showing useful ads is that their behaviors are too narrow – they don’t have a full tagcloud of interests that could be used to drive content recommendations.

    The approach we’ve taken separates the data collection from the ad display and also provides a Web service API to make the decision about what to show – relevant ads or relevant content.