I just saw the headlines from a report this week that Google is earning $1.10 of every new search dollar spent. This didn’t make sense (obviously) because Google is magic, but I couldn’t imagine how they were creating money out of nothing. Turns out that the explanation is simpler:

“For every new dollar spent on search in Q2 2008 versus Q2 2007, $1.10 went to Google. Yahoo lost $0.09, and Microsoft lost $0.01. In other words, advertisers are putting all of their new search dollars into Google, and pulling money out of Yahoo Search and Microsoft Live Search.”

Looks like Efficient Frontier Insights, the company that published Search Engine Performance Report: Q2 2008, is looking for publicity with that headline, because it isn’t really accurate. Google may be taking money away from Yahoo and MSN, but they aren’t taking $1.10 of every NEW dollar. Google may be taking old dollars away from its competitors, but it isn’t creating money out of nothing.

Nevertheless, the news remains strong for search advertising. Some other highlights from the report - CPC rates increased for all three search giants compared to Q2 of last year, as did ROI.

My latest article for The Industry Standard is now up online: Three online video formats for the future. In the article, I take a look at the current state of online video advertising, and make some suggestions about where video advertising might be able to head in order to stay relevant to the medium and to move beyond traditional ad formats.

In the course of researching for the article, I came across a lot of great online video stats. These are in addition to some earlier articles about online video that I posted to this blog. Those articles are here:

Online video stats for September 07
Video is not going to kill the Internet in 2010
Some more YouTube stats

The new data covers a wide variety of information, from online video usage to online video advertising metrics. I just am going to include it here because it’s great information for anyone who is following online video. I’ll also include links to all the sources so that you can explore the information in context.

Online Publishers Association - Online Video Advertising, Content and Consumer Behavior (PDF)

This report contained a great deal of useful data, particularly about audience reception to online video advertising, including the following statistics:

• Over 40% of U.S. online video users watch online video on at least a weekly basis; over 70% at least monthly.
• 80% of U.S. online video users have watched an advertisement in an online video. Of those people, 52% took action after watching that video; 28% looked for more information; 19% clicked a banner ad that accompanied the video; and 16% bought something as a result of the ad.
• 56% prefer that the advertisement is related to the video content.
• Both 15- and 30-second pre-roll ads are effective at lifting brand awareness; 30-second ads outpace 15-second ads in “likeability.”

Advertising.com - Bi-Annual Online Video Study: First-Half 2007 vs. Second-Half 2006 (PDF)
This study bills itself as the “who, what, when and what works of online video consumption and advertising.” The most surprising data from this study is the age range of online video consumers.

• 31% of 18 to 34 year olds watch streaming video; 69% stream video more than once per week
• 69% of consumers 35 and over watch streaming video; 47% stream video more than once per week
• 95% of those surveyed are streaming video at home (vs. 4% at the office and 1% at school); 45% of streaming takes place in the evening.
• 42% of consumers have forwarded a video clip to a friend
• 94% of consumers would prefer to view ads than pay to watch a video
• 63% of consumers would prefer ads that are shorter than television ads
• Consumers are 8% more likely to view a 15-second advertisement through to completion (vs. a 30-second advertisement)
• The 30-second pre-roll slightly outperforms the 15- and 5-second ads when measured in terms of click-through rate

BtoB - Interactive Marketing Guide

comScore - More than 10 billion videos viewed online in the U.S. in February (08)
This is the most recent data that I could find - the highlights:

• U.S. Internet users viewed more than 10 billion videos in February; this is a 3% gain vs. January, and a 66% gain from February 2007
• 135 million U.S. Internet users spent an average of 204 minutes watching online video in February
• 72.8% of U.S. Internet audience viewed an online video
• The average online video duration was 2.7 minutes
• The average online video viewer consumed 75 videos

Online video is already huge and getting bigger all the time. At least 75% of Internet users watch videos online and 8 hours of video content being uploaded to YouTube EVERY MINUTE. But there is a problem with online video because no one has (yet) figured out a long-term viable advertising model that will work with video. Google (which owns YouTube) is certainly working on it, but all the models that have debuted so far - pre-roll, post-roll, sponsorship - have fallen short because none of the formats have taken advantage of the inherent interactivity of the Internet. That is, until now.

I just took a look at what Revision3 and VideoClix have teamed up to put together and it’s great. Not only is the ad format interesting and cool, it’s also fairly unobtrusive and seems tailor-made for the Internet’s interactive format.

The first video to debut with the new technology is Diggnation (although all of Revision3’s videos will have the technology shortly). Watchers are able to interact with the video as it’s playing. When a viewer clicks on an item in the video that has additional information included, an area is displayed to the right of the video that has the details about the item, as well as room for advertising or additional vendor information.

This is clever. For one thing, the information that was provided was fun and interesting. (For example, I found out that the Lloyd Hotel in Amsterdam has rooms that range from 1 to 5 stars and one of the rooms has a shower in the middle of the room.) I wanted to click every link in the video to find out more about the video that I was watching, the clothes that the hosts were wearing, and even to see what computers they were using. Since my clicks didn’t stop the video, I was able to click around when something was happening that I was less interested in watching and I didn’t have to miss anything that I didn’t want to miss.

My prediction - this online advertising format will be viable and long-lasting, particularly in the consumer market. Clickable video is here to stay.

My most recent article for The Industry Standard is up on the site now: What the ValueClick settlement means for the future of lead generation. Why don’t you go read it? And hey! Why don’t you leave a comment if you have something to say.

For those of you who don’t know the background to the story, ValueClick just recently agreed to pay $2.9 million to settle the FTC allegations that they were doing bad things with their business, including:

1) Lying to consumers, advertising free offers, but then requiring consumers to pay or purchase to qualify for those “free” offers.

2) Violating federal law, specifically, the CAN-SPAM act.

3) Not securing customers’ financial data, even though they promised to secure it.

The press release from the FTC with the complete list of charges is here.

ValueClick will admit to no wrong-doing. Here’s what ValueClick says about the charges:

“The FTC alleged that the Company utilized deceptive marketing practices that violated the CAN-SPAM Act and FTC Act. In an effort to resolve this matter, ValueClick agreed to a settlement payment of $2.9 million without an admission of liability or conceding that the Company violated any laws.”

Having worked in the lead generation industry for years, I know that this is not the norm in lead generation and that most lead gen companies follow solid business practices; but yet, these types of scams do happen fairly frequently. Lead generation is a big business in the U.S. (see images below) and gettng bigger as companies realize the value of generating data that can provide specific metrics and ROI. So companies will use many different tactics - not all of them aboveboard - to generate leads for their clients.

If you’re doing lead generation through a third-party provider, make sure that you get them to explain in detail the following things:

1) What the environment looks like in which they will be generating leads. If they are creating a registration form, make sure that they show you what it looks like.

2) How they are generating the traffic that drives the leads.

3) If they are doing “co-registration” to generate their leads. Co-registration is the practice of including a check box at the end of another registration form so as consumers register for one thing, they also can “opt-in” for your thing, too. If they are doing co-registration, find out if the box is pre-checked, and if it is, run the other way.

4) Ask for a client reference - they should be willing to let you talk to someone else who has used the service and found it reputable and helpful.

Here are those lead generation numbers that I promised. This image is taken from the BtoB Magazine’s Interactive Marketing Guide for 2008, which has a lot of great online advertising data.

BtoB Magazine just released its Interactive Marketing Guide for 2008. (PDF here) The 36 page guide features a lot of great data about the state of online advertising, including the following gems:

- In 2007, U.S. marketers’ best performing advertising tactic was search engine optimization (SEO) at 57%, followed by behavioral targeting (44%) and email house list (42%). Rich media ads, which rated at 28% last year, trailed the list at 7% in 2007.

- In 2008, U.S. ad spending will break out like this:
         - Search: 40%
         - Display ads: 21.5%
         - Classified: 17%
         - Rich media/video: 9.5%
         - Lead generation: 8.3%
         - Sponsorship: 2%
         - E-mail: 1.8%

- 82.4% of marketers plan to increase their email marketing this year, compared to 2007.

- In the U.S. spending on online social networking advertising by marketers is on the rise with the following growth:
         - 2006: $350 million
         - 2007: $920 million
         - 2008: $1.56 billion
         - 2009: $2.02 billion
          -2010: $2.4 billion
         - 2011: $2.7 billion

There’s lots of other interesting data in the report, as well, so check it out.

Earlier this week, Comscore released some data on Google paid click numbers that caused Google stock to take a nosedive, based on reports from a variety of news sources that this was a sure indicator that Google was vulnerable to a recession.

Today, in a blog post, Comscore gave its take on the data - “Why Google’s surprising paid click data are less surprising.” The main point? That the data that Comscore released may have been incorrectly analyzed by almost everyone who read it:

“The information triggered a flurry of reactions in the media and the financial community that centered on two concerns: 1) a potentially weak first quarter outlook for Google, and 2) an indication that a soft U.S. economy is beginning to drag down the online advertising market.

“While we do not claim that these concerns are unwarranted, we believe a careful analysis of our search data does not lend them direct support. More specifically, the evidence suggests that the softness in Google’s paid click metrics is primarily a result of Google’s own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur.”

I continue to be of the opinion that the drop in click-through rates isn’t a negative thing and is primarily the result of Google’s ongoing efforts to combat click-fraud and accidental clicks to its ads. 

I also think that Google is likely going to have slower growth if the entire economy goes into a recession. Afterall, what media company isn’t vulnerable in a recession?

The news is just out today that About.com’s CEO Scott Meyer is leaving the company.

I have been following About.com for years, primarily because I have been in the business of building content networks and About.com has been around in this space for a long time. At this point, About.com is one of the saddest sites on the Web. I mean, it’s owned by the New York Times Company, one of the most venerable content producers EVER, and what has About.com done in the past few years? It has just about maintained the status quo with its network of Web sites - About.com gets traffic, but that’s about it.

Do you know anyone who loyally follows About.com? Can you name an About.com guide?

About.com should be doing something more, different and interesting. They have traffic, they have a strong parent company, they have a solid brand name, they have expert content producers in every niche…but yet, they are so, well, boring.

From the NYT annual report, courtesty of paidContent.org:

“We estimate that approximately 70% of About.com’s traffic is generated through search engines, while an estimated 25% of its users enter through its home and channel pages and 5% come from links from other Web sites and blogs. Our other Web sites also rely on search engines for traffic, although to a lesser degree than the Web sites of the About Group. “

Yawn.

Perhaps Scott Meyer is moving on in hopes of doing something a little more interesting.

Google’s stock price is dropping, and people are freaking out. Yesterday’s stock price drop was in response to a recent report from Comscore indicating that January 2008 showed only flat growth year-over-year versus a 25% increase in Q4. This apparently is the result of lower click-through rates on paid search ads, and people are worried that this means that Google is exposed to a slowdown if there is a recession in the U.S.

The near-panic is somewhat understandable considering that the overall U.S. economy isn’t doing all that great, the tech folks are scared of another bubble, Microsoft is talking about taking over Google, Apple’s stock is dipping, and everyone is looking for someone - anyone - to believe in. Google has been the obvious choice for a long time, and no one wants the tech darling to falter.

But the thing that I take issue with is the notion that this decrease in clicks is a result of consumers clicking less because of a coming recession. These numbers from Hitwise show that there has been no decrease in overall search traffic to shopping sites - meaning that consumers are still clicking.

And if consumers are still clicking on search links, why would they suddenly not be clicking on paid search ads? Could this be because consumers suddenly have become more discerning about what is a “paid” result vs. what is a “organic” result? No way.

My question for Google would be about how much of this decline comes from the dip in clicks on AdSense partner sites. My bet is that the clickthrough rates have dipped significantly on partner pages. Why? Primarily because of the click fraud prevention that Google has been implementing, as well as the “accidental clicking” measures that Google took back in November.

Remember, this was the second change that Google made to its ads; the company first changed the paid results on its main search pages in April, a move that many advertisers said led to a decline in the number of clicks, but not in the amount of revenue that they were earning.

And this might just be the bottom line. If there is no growth in the number of clicks, but revenue is growing, Google may have figured out a way to increase ROI for advertisers. Like this Businessweek article says, we’ll have to wait for earnings in April to find out for sure.

In October, I posted the Internet Advertising Bureau’s estimates for U.S. online ad revenue for 2007; at the time, they were predicting $20 billion to $21 billion.

According to the numbers released today (which I saw first in TechCrunch), the IAB’s preliminary estimate for 2007 is that Internet advertising hit $21.1 billion in the U.S. - just slightly higher than they initially predicted.

TechCrunch also reports on the estimated numbers from a couple other sources:

Kelsey Group: $22.5 billion
IDC: $25.5 billion

This is happening in Sweden, not the U.S., but still. This is just the beginning.

And this article from PaidContent U.K. says that Britian and Denmark will be next.

“Sweden will this year become the first country where internet ad spending will surpass that given over to TV ads, according to the This Year, Next Year 2008 forecast from WPP’s heavyweight Group M ad buying agency, released quietly last month. The UK will fall just short of the same watershed this year, finishing 2008 with online accounting for 24.8 percent of ad spend, just shy of the 26 gobbled up by TV (in Sweden, it will be 19.5 percent to the web, 19.2 percent to TV). But online will overtake telly in Britain and Denmark early in ‘09, the group predicts.”