May 25, 2004

E-commerce > Will BlogAds Work? or, Why Glenn Reynolds Should Keep His Day Job

Tuesday E-commerce Report #11

One of the many refreshing things about blogs has been the absence of advertising. That commercial-free nature is fading as bloggers face the economic realities of Web hosting costs, and a need to justify their writing time with a monetary return.

There are a number of existing advertising programs available to bloggers, but BlogAds is the one directly targeted at the market. BlogAds says that the average site makes $50 per month, but the real attention has gone to high-profile bloggers like Glenn Reynolds. He's currently running seven ads at $1000 per month, minus BlogAds' 20% take. Projecting those numbers out, that's $67,200 per year.

Unfortunately, I don't expect those numbers to rise much, if any, before an inevitable decline sets in. BlogAds the company may be new, but they're an old story in terms of Internet advertising.

I speak from experience as both a buyer and seller of Web advertising. From 1997 to 2003 I sold banner ads on 56K.COM. I sold ads directly to advertisers, and sold excess inventory to banner networks. Since 2000 I've done the ad buys in my current job, though I quickly learned that search engine keywords and price comparison services like PriceGrabber were a much better deal than banner ads.

As the Internet caught on, 56K.COM's traffic started going through the roof, but the same thing was happening to everyone else. In early 1997, I applied to DoubleClick, which was the premier advertising network at the time, but I didn't yet have the necessary 100,000 pageviews per month. A little while later I hit that goal, but DoubleClick had changed the goal to 1 million page views per month, which I hit the next year. Blog traffic has similarly skyrocketed since 9/11.

Ad inventories kept climbing across the industry. There were more Web sites, and more people with access to the Web, but advertising demand didn't increase proportionally. As inventories went up, prices went down. 56K.COM's revenues peaked in 1998, though traffic continued to climb.

One trend that hurt banner advertising prices was that click-through rates - the percentage of visitors who clicked on the banner ads - declined dramatically. To compensate for decreasing ad revenues, sites began using more and larger ads. That accelerated the backlash against banner ads. People began tuning them out and turning them off with ad-blocking software such as AdSubtract and WebWasher.

All of this led to the scourge of pop-up ads. Everyone hates them, but they came about for a simple reason: people had stopped clicking on inline banner ads. Pop-ups solved that problem for a while until they, too, generated a backlash and blocking software.

The same patterns are playing out with BlogAds and blog advertising in general. Already most blogs with ads are using multiple banners. Blog pop-ups are probably just around the corner, if they haven't happened already. Text ads in RSS feeds are a possibility.

Another reason InstaPundit shouldn't quit his day job: ad buying patterns are cyclical. The dotcom boom helped Internet advertising for a time, but that came to an end. Right now sales may be high in part because we're in an election year, but that ad cycle ends in November.

BlogAds are currently in the novelty phase where they're interesting because they're new, but if history is any indication they won't be any more successful than other attempts at banner advertising.

And Glenn Reynolds and other top bloggers? They'll be the last to be affected by a downturn in BlogAds. As the most popular bloggers they have brand appeal that demands a high price. They also have a disproportionate amount of the blogosphere's traffic, which brings a disproportionate advantage. In theory, ad buyers can get better bargains if they buy lots of ads on small, value-priced sites. In practice, it's too much work. Buyers prefer to place a few large orders with a few large sites. As with traffic, a few top bloggers will get most of the ad business.

Posted by lesjones

AlphaPatriot linked with BlogAds
Say Anything linked with Internet Ads Are A Necessary Evil
Rebel Yell linked with RTB Tailgate Party XXIX


I suspect that Blogads would be, in a word, reundant. That's true for many of the blogs out there.

Blogs themselves are one giant branding exercise. Blogs are in fact ads.

They market an individual's professional or personal views as well if not better than a resume or CV.

Certain blogs can be an advertisement for employment (adrants) or a branded CV (, econ library). Some end up becoming people's jobs (CalPundit).

The traditional advertising model gets turned on its head when the product is the ad -- the information being given away becomes indistinguishable from the product sold: The Blogger . . . .

Posted by: Barry Ritholtz at May 31, 2004

Good comments. Hope you are wrong. The $67,200 question: are blog page impressions in some way unique? Some longwinded ideas about this question here:

Posted by: henrycopeland at July 01, 2004
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