In this edition of Web Enlightenment we'll be talking about how internet advertising can be a total scam.

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Yes, they Will Rip You Off

Ben Edelman, an assistant professor at the Harvard Business School, has gotten some really nice press lately. Articles have appeared in the Wall Street Journal, PC World, ClickZ, and a veritable bevy of blogs. They report the shocking fact that companies we have all heard of, like Kraft, Capital One, and Greyhound, recently got ripped off when buying online advertising.

This doesn't surprise me at all. It happens all the time. Seriously. All the time.

What actually occurred in this case is that these ads were displayed in an "invisible" window so the advertiser was charged for an impression when in fact there was no way a real person on the web could have possibly seen the ads (not a new trick, in fact a very old trick).

I don't mean to kick someone when they are down - but buying impression ads on the Internet today just isn't incredibly smart. With the exception of mega-corporations trying to achieve "media saturation" I can't fathom why anyone would ever buy an ad like this, and yet many ignorant marketing types still do. These shenanigans have gone on for many years and the idea they may be getting worse now is to be expected.

You might note that all of the identified victims have something in common - they used an ad agency or ad network to make the buy. This really gets right to the root of the problem and it speaks to a cultural divide among people offering to sell web advertising to Internet Entrepreneurs like you.

You see - there are lots of folks selling ads on the web that completely ignore the tracking and measuring technology we have developed in the last 20 years. Typically folks like this sell banners and they want to sell you an ad in one of two ways - either by a fixed price ($500 a month for a home page banner) or by "the impression", so much per thousand times the ad is displayed.

This basic idea comes from an era long gone by and we're about to discuss three important companies that were all founded before 1950 to understand where all of this stuff comes from.

When you spend a moment thinking about the way advertising used to be sold you can understand the way some silly folks are trying to sell online ads today. As depressing as this is I tend to think these folks simply can't comprehend the way web advertising should be sold.

Print publications produce a specific number of copies and there have always been concerns there - from unsold copies to giant bundles of "free" newspapers being thrown into a sewer - there are significant issues with correlating the circulation of a publication and the ad value. Wikipedia says it best here:

At the turn of the 20th century, publishers were ungoverned. A practice of inflating circulation figures to win advertising dollars was common. With little recourse, advertisers were forced to buy advertising based on exaggerated circulation claims. Determined to end deceptive industry practices, advertisers, advertising agencies and responsible publishers banded together to establish an industry organization to independently verify circulation. In 1914, ABC was created.

The Audit Bureau of Circulations - or ABC - was intended to eliminate deceptive advertising practices based on lies about circulation. We are supposed to be able to determine with accuracy how many pieces were printed so there is less cheating in selling print ads. A good thing and it basically works, although auditors still catch lies in circulation numbers a heck of a lot more than never.

Then you have broadcast media: TV and Radio. The basic problem there is that we can't simply count all the dead trees like we can with a newspaper. It is not technically possible to determine how many people are listening to a radio station or watching broadcast TV at any one moment. So we resort to the far less accurate and yet very popular survey method. In 1949 a company was founded that you have probably never heard of - Arbitron. Folks tend to remember them when they get actual cash in the mail in exchange for filling out a diary of what radio stations they listen to. These people basically do the same thing as a firm founded in 1923 that you probably have heard of - Nielsen. Nielsen determines the viewing habits of the 100+ million TV sets in the United States by using their panel of 25,000 "metered households", what those folks watch determines what a "Top Rated Show" is.

So the basic premise of Arbitron, Nielsen, and the ABC is the same - you can raise a lot of legitimate questions about the data they provide and they'd be the first ones to say it is a calculation - but the bottom line is that everyone is using the same information. This means people buying print, radio, and TV ads are all supposed to be getting ripped off equally. No one is saying they know how well your ad works, they're just saying that they have the same level of don't know for every person they deal with and they use the same set of unprovable assumptions to set the prices for everyone. Hmmmm - ok, I guess that could be construed as "fair".

Then we have one of the most important dates in advertising history - February of 1998. They don't teach it to folks headed down a traditional ad path and if you asked people on Madison avenue about this date they'd have no idea what you may be referring to but trust me this is an incredibly important date - one day you won't be able to get out of marketing school without knowing it.

In February of 1998 a little company called GoTo invented Cost Per Click Marketing. I'm not sure why but technology is almost never invented by the company that proceeds to make billions with it - the PDA was first brought out by Apple as the Newton in 1993 and years later Palm came along and changed the world with PDA's.

Google makes billions with AdWords but it was not their invention. So in case you don't know about it Cost Per Click marketing (or pay per click as some call it) is any form of ad where you only pay for the people that actually click it and visit your site.

This is like a newspaper saying that they'll run your ad for free but if anyone calls you then you'll owe money for each of those people - an incredibly insanely good idea that took the advertising world by storm. Many say this one concept is largely responsible for the decimation of print newspapers and those folks have got a good point.

So as an Internet Entrepreneur here is what you need to know: don't buy ads for a fixed price or for a per impression cost, buy them per click. Until you are purchasing all the available inventory of the ad they run for free where they only charge you for folks that actually come to your site it is rather insane to even consider any sort of fixed price or cost per impression ad.

Mainebiz Article

My thanks to the good folks at Mainebiz for asking me to author a guest column.

You can check out the article - Off The Top of Your Head - by clicking here

For those of you that are related to me I have indeed purchased evey copy I could find on newsstands and your dead trees are in the mail.