How to Make Money with Online Ads: SXSW 2005

Mar 16th

Online panel with Philip Kaplan, Jason Calacanis, Gokul Rajaram, Henry Copeland, & Bill Flitter. To get an overview of the size and compare the various blog advertising networks (and Google AdSense)

# of salesmen:

  • Google has a ton of salesmen.

  • BlogAds has 2 salesmen
  • Pheedo has 3 salesmen
  • AdBrite has 6 salesmen. 3 for inqueries and 3 for calling advertisers. AdBright also recently accepted $4 million dollars in VC funding.

service & fees:

  • Google AdSense places contextually relevant ads on your site. While they have the largest distributed ad network they do not state the profit share percentage. Google introduced Smart Pricing a while back, which works to automatically discount the value of a click if they believe the site has low quality traffic. He stated that the publishers were not given a smaller share of the cost per click in these situations, but that the overall cost per click is lowered.

  • BlogAds allows you to sell flat rate ads. They keep 20% of the ad spend.
  • Pheedo allows you to track your RSS feeds and also places contextually relevant cost per click ads in your RSS feed. They keep 35% of the ad spend.
  • AdBrite allows you to sell flat rate targeted ads. They also allow you to sell bulk untargeted ads if you chose to. They provide a great overview of stats including repurchase rate. They keep 25% of the ad spend.

Business models for blog networks:

Jason stated that he expects many publishers to stack the various advertising networks on their sites to achieve maximum profitablility. He stated that when he started his network he wanted to pay bloggers 50% and that did not work. He later said that he gave the bloggers the first $500 and then 50% and then that did not work. Now he stated that he pays bloggers a flat monthly fee. He stated Gawker media pays $2,500 per month. One of the major benefits of blogging is that the time spent editing normal media is not usually required for bloggers.

He stated that at this point the bloggers still usually need to do something else to get to self sustaining but he thought that the business model would allow bloggers to just blog for his network sometime next year.

Jason also stated that for the people who run multi channel blogs that the more profitable channels are used to pay for the less profitable channels. The channels which lose money can still be ran to offer a wider selection or offering to people who like the network. His goal was to run 700 channels. Recently I believe they launched their 75TH channel.

Criticsms for this panel:

  1. For this panel being about making mone with online ads it was a bit excessively focused on blogs. If it was to be exclusively about blogs it should have said that on the schedule.

  2. I can not fathom how there was a panel about making money with online ads and there was exceptionally little coverage given to the concepts of:
    • selling ads directly

    • partnering up with a merchant or creating your own product
    • affiliate programs
    • selling links
    • sponsored posts
  3. I asked about low quality screen scraper sites participating in AdSense and got a fairly canned response from Google AdSense's product manager. He stated that they use technology and people to review sites and disapprove low quality ones. If they do that then they are doing a lousy job.

    Discounting the click prices a bit and still leaving sites in the program still encourages people to cloud up the web with crap sites. Granted a long time ago I made a few crap sites myself, but Google could at least be honest about not caring about that issue.

  4. On that same question Jason Calcanis stated that click fraud is a non issue. He stated that people were just looking to make up ways to find problems with the business model. He then pointed at Google's AdSense product manager and stated click fraud is not a problem, and he of course agreed.

    Funny that this is the complete opposite answer to what George Reyes, the CFO of Google, gave a while back.

    "I think something has to be done about this really, really quickly, because I think, potentially, it threatens our business model."

  5. As a person who has probably bought and sold around $100,000 worth of various ads in the last year I know that fluctuations in bid prices or click volumes can have significant effects on ROI and ad spend.

    Even if the fraud averages out over time it still:

    • tears apart consumer trust

    • increases account management time. If it takes me more time to manage an account then it costs more money for me to manage it, and that means less money is going to Google.
    • causes more inefficiencies in the market
  6. This panel should also give tips on how to increase site exposure and ad click through rate, since those concepts directly relate to ad revenue.

Bonus Rant:
Jason Calcanis used his speaking gig to rip on Gawker media no less than three times.

  • talking about finding Michael Jackson news on Gawker

  • talking about finding a Lindsay Lohan nipple slip on Gawker
  • saying "I read it on Defamer. It must be true."
  • words and tone matter. apparently I was not the only person who noticed Jason using the microphone for the wrong purposes

    post: Sometimes panelists need to be reminded that they are there to talk about the topic at hand, not to trash people they don’t like and then admit they never heard of the topic of the session till they were asked to be in it. Could have been a really interesting session, though.

    comment: i agree. i think two audience questioners put it best when they basically said you ALWAYS have to consider the authenticity, knowledge and motivation of ANY source. After sitting through this session, I question all three for panelist Jason Calacanis.

For a person strong on the blog ethics concpet you would think he could give a speech without doing that crap.


Published: March 16, 2005

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Comments

March 19, 2005 - 6:31pm

>> Jason Calcanis used his speaking gig to rip on
>> Gawker media no less than three times.
>> * talking about finding Michael Jackson news on
>> Gawker
>> * talking about finding a Lindsay Lohan
>> nipple
>> slip on Gawker
>> * saying "I read it on Defamer. It must be
>> true."
>> * words and tone matter. apparently I was
>> not the only person who noticed Jason using the
>> microphone for the wrong purposes

I thought I was being nice giving the quotes to Gawker on that panel! I even pulled up their blog to give them some props as a customer of blogads! I was giving it to Lockhart a little (the guy who runs gawker), who was in the second row... but that was just for fun. :-)

On the other panel which was about ethics they Gawker came up a lot. I'm a blunt guy and when we are talking about ethics and standards Weblogs, Inc. and Gawker has two different world views.

Now, we are not exactly the same company... we overlap with them on four of our 75 blogs I think, and the truth is most of their traffic--like maybe 75%--comes from porn and gossip which we don't touch. So, we are even less competitive then the four overlapping blogs make it appear. I don't consider them direct competitors with us, and I don't think Nick does either.

However, they take junkets from sponsors then write 20 posts about them in three days, and they post stolen porn videos to their site... that is a a real different style of publishing then what we are doing.

so, I thought they were all valid points...

March 19, 2005 - 7:48pm

>I thought I was being nice giving the quotes to Gawker on that panel! I even pulled up their blog to give them some props as a customer of blogads! I was giving it to Lockhart a little (the guy who runs gawker), who was in the second row... but that was just for fun. :-)

Some people may not have been aware of you giving it to him a bit. I understand having fun and all, but I think it might turn some people off.

>On the other panel which was about ethics they Gawker came up a lot. I'm a blunt guy and when we are talking about ethics and standards Weblogs, Inc. and Gawker has two different world views.

It is fairly obvious they are a bit more risky than you.

>Now, we are not exactly the same company... we overlap with them on four of our 75 blogs I think, and the truth is most of their traffic--like maybe 75%--comes from porn and gossip which we don't touch. So, we are even less competitive then the four overlapping blogs make it appear. I don't consider them direct competitors with us, and I don't think Nick does either.

I think you guys have the two biggest blog networks. Some of your overlapping brands are some of the best blog brands on the web. Engaget vs Gizmodo, etc.

>However, they take junkets from sponsors then write 20 posts about them in three days, and they post stolen porn videos to their site... that is a a real different style of publishing then what we are doing.

They are a bit more aggressive indeed.

>so, I thought they were all valid points...

They may have been valid points, but on the same token I would have liked to have seen people push more of the concepts of risk vs reward. And also the promotional angles...drama builds linkage data.

So long as people do not go too far over the line (or so long as they can afford to risk everything) then perhaps being a bit more aggressive and risky is a proper business model for that blog or website.

April 6, 2005 - 1:05am

When would the e-gold economy ever catch up in today's world. When?

We need a situation where ad agencies like google can pay their clients via e-gold.

March 20, 2005 - 1:18am

I do wish we spoke less about our businesses, and more about "making $$$ with online advertising"; the title of the panel.

It turned into "compare and contrast 5 ad programs", which may have been more interesting to the people on the panel (especially Jason, who was asking the questions) than the audience.

That said, I learned a lot and thought it was a great show!

Philip

PS- You spelled "AdBrite" wrong.

March 17, 2005 - 2:41am

You're right - it is very strange that they don't mention bloggers dealing directly with advertisers. I found that adsense had a very low CTR on one of my blogs but ahve since made it profitable by finding advertisers myself and offering them text link ads as well as selling text link ads through brokers.

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