September 30, 2003, 12:00 AM

Measuring the effectiveness of contextual ads

A study by a marketing company calls into question the effectiveness of placing ads alongside the content a user is viewing at non-search sites. Google, the major promoter of such ads, releases statistics showing increase in average order by consumers who click on such ads.

It sounds like a good idea-place ads in the context of content-so when a consumer is reading about the White Sox at a news site, for instance, a link to buy White Sox merchandise appears nearby. Google started such a service earlier this year. But a study by marketing services firm NewGate Internet says the reality isn’t living up to the concept. “The contextual ads we tried for our clients showed very poor conversion rates,” says Tom Dugan, president of NewGate. Google begs to differ.

NewGate presented some of the results of its study involving two retailers and a manufacturer at Jupitermedia’s Search Engine Strategies conference last month. NewGate notes that Google’s AdWords Internet search advertising program, in which ads appear near search results at, is more effective than AdWords that appear on publishing sites. Google calls both its contextual ads and search ads AdWords, but when talking to content sites about the ability to host ads, it uses the name AdSense.

The AdSense program’s content ads, also known as contextual ads, use a formula to cause clients’ ads to appear on editorial pages that have content related to the ads. Content publishers and Google share advertising revenue.

Google counters that NewGate’s study looks at only a tiny sample of the 100,000 advertisers eligible for the AdSense program, and reports that many customers are showing strong conversion rates. “Our customers get qualified leads in search ads and we’ve found that search and content ads have similar conversion rates,” says Susan Wojicki, Google director of product management who appeared on the same Search Engine Strategies panel with NewGate.

Further, Google reports that Impact Engine, a subscription web site that helps customers create Flash-based online presentations, experiences a nearly fourfold increase in average orders from customers who click through from a content-targeted ad vs. a search ad. Impact Engine also says it is unconcerned about the lower click-through rate because it pays only for clicks-not for ad placement-and the average ticket is so much higher.

Dugan contends that the results of the NewGate study point to an inherent weakness in contextual ads-they catch consumers at a time when they are not necessarily in a buying mood. “There’s a big difference with someone using a search engine, because that’s when people go out and look for specific products,” he says. “But contextual ads are more like banner ads popping up on their screens, and people tend to ignore them.”

Not so, says Impact Engine, in a case study created by Google. “Our AdWords ads are doing well,” says Neil Greer, CEO of Impact Engine, “and it’s clear that with content ads we’re reaching further into a customer segment that spends more.”

Brad Byrd, NewGate’s director of business development, who conducted the study, says NewGate focused on Google’s AdSense program because it was the only one available to review in comparison with an Internet search advertising program. Other content ad programs are now available from Overture Services Inc. and Primedia Inc.

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