The Rise of In-Content Advertising

Jul 11, 2011   //   by admin   //   Media blog  //  7 Comments

by Oliver Roup (Guest Contributor)

Today, there isn’t a strong need for consumers’ schedules to revolve around their favorite TV shows, thanks in large part to the Digital Video Recorder (DVR).  They allow viewers to record their favorite shows and play them back when it is convenient for them.  As a result, the quantity of viewers watching commercials has dropped so they just aren’t as effective as they used to be. So advertisers have stopped relying exclusively on commercials to get their message out and are increasingly turning to advertising that delivers their message directly within a program’s content (commonly referred to as product placement).  Integrating advertising into program content makes sense since program content is what viewers are truly interested in, where their attention is the most focused, and where an advertising message has the highest chance of being understood and acted upon.

The Evolution of Online Advertising
Today, we are seeing a similar transformation occur online.  Originally, banner ads were the predominant form of online advertising, as commercials were on TV.  But just as TV  commercials lost their effectiveness as consumers changed the way they watched television, banner (and even text) ads are losing their effectiveness as online readers have grown accustomed to the spaces in web pages dedicated to advertising and have started to simply ignore these areas.

To illustrate this point, let’s consider the web’s first banner ads which went live on HotWired on October 27, 1994.  The click-through rates (CTR) on some banner ads were as high as 78%.  Today however, according to Google, the average CTR of a banner ad is closer to just a fraction of one percent (0.10%).   What brought the figure down so significantly?  Consumers realized that banner ads typically didn’t contain the information they visited the web site for and they started to ignore them.

A term called banner blindness was coined to describe this phenomenon, and numerous studies (complete with eyetracking heatmaps) have confirmed its existence.  The following image demonstrates where readers’ eyes spend time on a particular web page.  It’s clear that the banner and text ads delivered above and around web content are largely ignored.

An additional challenge banner ads face is that they aren’t delivered at a time when the reader is compelled to take action.  So, even a well-designed and well-targeted banner ad may attract eyeballs but that ad won’t necessarily “convert” into an action because the reader isn’t looking for product information at that point in time.

These two limitations can be summarized as follows:

  1. Banner ads are largely ignored by most website visitors.
  2. Banner ads that are viewed don’t convert at a high rate because they aren’t delivered at a relevant time.

The solution to these limitations is to reach website visitors where their attention is, when they are ready to take action.  A form of advertising called in-content advertising allows advertisers to do just this.

In-Content Advertising Overview
In-content advertising is similar to the product placement advertising options businesses turned to when television commercials began to lose their effectiveness.  The category of “in-content” advertising can mean anything from tightly integrated, contextually relevant in-content links to text or banner ads placed between pieces of content.  The discussion here will focus on the former due to its stronger performance and consumer experience.

Tightly integrated in-content advertising works for the very reason that banner advertising doesn’t:

  1. Website visitors see and interact with these ads. The content portion of the site is where readers spend their time and where their attention is focused.
  2. Website visitors experience these ads when they are actively seeking information. Web visitors are exposed to in-content advertising when they are reading about a product, service, or company that they are interested in, or when they are seeking advice on a product purchase.

Options
There are a variety of delivery options available for this type of advertising, most of which fall into one of two general categories: link affiliation or link insertion.

Link Affiliation
Link affiliation ensures that links inserted by visitors in a social media environment, or links inserted by an author within an article or blog post, are associated with online merchants and advertisers.  Advertisers that participate in these programs pay publishers on a per-click basis (when traffic is sent via a link to their site) or on a per-sale basis (when traffic results in a purchase).

Some companies offer an automated link affiliation service that manages and optimizes link affiliation for site owners.  Alternatively, site owners can sign up directly with advertisers and advertiser networks and manage the link affiliation process on their own.

As an example of link affiliation, let’s consider a site owner who posts a movie review on his or her site and opts to link the DVD’s title to a page on eBay where visitors may purchase the movie.  eBay (the advertiser) gives incentives to publishers to send traffic to them.  If the site owner is using an automated link affiliation service or has opted to manually affiliate the link with eBay they will receive a monthly commission payment reflecting the clicks or sales the link generated.

Link Insertion
Link insertion applies algorithms to a web page to infer its content and adds links to the page that is relevant to the page content.  These links take the reader to a page on an appropriate merchant’s web site.  Vibrant Media and Kontera are the best known link insertion providers, although their solutions tend to focus more on inserting ad units (think a link with a pop-up ad).  Other services, including VigLink’s link insertion tool (Disclosure: I am the CEO of VigLink), insert product links.

Let’s revisit the example of the movie reviewer above to illustrate how link insertion services work.   Here, the movie review that is published doesn’t include a link to the DVD’s title so a reader can easily find the DVD.  Link insertion services recognize the title of the DVD and add a link to an online merchant’s site where a reader can purchase the DVD.  The publisher receives payment when their visitors click on the link or purchase the DVD and the advertiser receives additional relevant traffic and sales.

The In-Content Advertising Advantage
In-content advertising offers advantages for the publisher, the advertiser and even the consumer viewing the ad.

Because these types of ads reach consumers at a point when they are more engaged and more likely to take action, publishers are typically able to deliver high CTRs and more conversions from these types of ads.  In-content ads also introduce a new revenue stream for publishers that doesn’t require additional ad space because the ads are delivered within the content itself and don’t access the space around the content where banners are already placed.

Similarly, advertisers generally enjoy a strong ROI on these types of ads.  Ads delivered within site content reach consumers exactly when they are seeking information about a product and can be very influential in purchasing decisions.

Finally, consumers benefit from access to product information at a time when they want to be connected with a particular product, company, or service (and of course if they wish not to be, they are still welcome to ignore these recommendations).  Thus, these ads are more likely to be considered useful information as opposed to marketing “noise.”

Concluding Thoughts
The way advertisers elect to communicate with consumers is evolving as the way that consumers seek and digest information changes.  Delivering advertising between slices of television programs during commercial breaks used to be effective, but this is no longer the case and advertisers have evolved to deliver advertising within the program itself.

The way consumers are locating information online is also changing drastically.  Consumers tend to ignore banner ads, preferring social media sites, online forums and blog content to help them make purchasing decisions.  In-content advertising leverages this monumental change in a way that benefits advertisers, publishers and consumers alike.  It is an advertising form that has all the makings to be the web’s next big advertising frontier.

Oliver Roup is the founder and CEO of VigLink, a service that allows online publishers to earn money from the content on their site.  Previously, he was a Director at Microsoft in charge of product for various media properties including XBOX Live Video Marketplace, Zune Marketplace and MSN Entertainment. Oliver was also an early employee at Internet Radio pioneer Echo Networks and has worked for Paul Allen at Vulcan, for iPlayer at the BBC and for the Founders Fund. Oliver has issued and pending patents covering micro-transactions, media and metadata. He received his bachelor’s and master’s degrees in computer science from MIT and his MBA from the Harvard Business School.

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