I don't understand online advertising

[disneysteve]

I was just reading that facebook is expected to have revenue of $17 billion this year, most of which comes from selling advertising space. Google also gets the bulk of its revenue from advertising. Almost every website you visit, including this one, features ads.

I just don't get it. I don't understand the business model behind this. I don't get how spending tens of billions of dollars benefits the companies that do this. I mean I understand how it benefits facebook and Google. They get the ad dollars. I don't understand how it benefits the companies placing the ads.

I have never and would never click on any type of online ad. I can't imagine why anyone else would either. Granted I see the ads (though I use an ad blocker now so I see a lot less of them), so I suppose that some companies see value in getting their name out there but is that really worth tens of billions? I wonder how much they spend on advertising vs. how much they generate in sales as a result.

Any advertising folks out there who can explain this?

[creditcardfree]

Why do you think that all online advertising is all about clicking? Think about television or print advertising...it isn't all that different.

[disneysteve]

Why do you think that all online advertising is all about clicking? Think about television or print advertising...it isn't all that different.

I disagree. I think it is a lot different. TV ads fill the screen for a period of time. You can walk away or mute the volume but you can't continue watching the show until the ad is over.

Online ads don't work that way. They are usually a box at the top or bottom or side of the screen. You can go about your business without ever looking at the ads.

I think print advertising is worthless too. I'm on the board of our synagogue and the question often comes up about whether or not we should advertise an upcoming event in the local Jewish newspaper. I always argue against it as I feel it is a total waste of money. We don't have any evidence to support that anybody outside of our congregation has ever come to one of our events as a result of a print ad. I read that newspaper every week cover to cover but don't look at the ads at all. I only read the articles. A couple of times our communications person asked me what I thought of our ad and I had to tell her I honestly hadn't noticed it. I just don't look at the ads.

[bjl584]

I was just reading that facebook is expected to have revenue of $17 billion this year, most of which comes from selling advertising space. Google also gets the bulk of its revenue from advertising. Almost every website you visit, including this one, features ads.

I just don't get it. I don't understand the business model behind this. I don't get how spending tens of billions of dollars benefits the companies that do this. I mean I understand how it benefits facebook and Google. They get the ad dollars. I don't understand how it benefits the companies placing the ads.

I have never and would never click on any type of online ad. I can't imagine why anyone else would either. Granted I see the ads (though I use an ad blocker now so I see a lot less of them), so I suppose that some companies see value in getting their name out there but is that really worth tens of billions? I wonder how much they spend on advertising vs. how much they generate in sales as a result.

Any advertising folks out there who can explain this?

I was told in several Marketing classes that I had that 50% off all Marketing and Advertising is a total waste. Unfortunately, no one knows which half.

[riverwed070707]

Hm IDK. I think this is another example of how you, and many people on this forum even, may be the exception to the rule when it comes to spending money. I think online advertising is one of the most effective because it uses information from your computer history to place ads that specifically apply to your interests and business. Right now as I type this there is an ad for 20% off care.com - not so coincidentally, yesterday I was on sittercity.com looking for new nanny candidates.

As an event planner I read industry magazines and local events calanders partially for the content but mostly for the ads because they tell me about upcoming events, any new competition that comes in, and what's trending in software, styles and networking.

What about the people who buy a paper the day before Thanksgiving exclusively for the ads?

While I too find them annoying at times, especially pop up ones, I can see their value and have no doubt that many companies are seeing returns on their ad spending.

[rennigade]

I used to work for a spamming advertising company...though they didnt use the word spam.

They would send out mass emails (those annoying ones like click here to claim a prize, etc.) It would go out to millions of people each day. They would also create banners for websites.

For example if they wanted to advertise here...they would pay savings advice money to throw a couple ads up on the sides. Whenever someone would click on their ad, it would redirect them to whatever site they wanted. Each click = money Although I cant quite figure out how the spam company makes money from each click on their ad.

I do know I didnt last long there, I hated it. That company later sold to a much larger spamming company for $144 million. Big money in junk emails/banners.

[rennigade]

We don't have any evidence to support that anybody outside of our congregation has ever come to one of our events as a result of a print ad.

This is 100% true. Theres no way to track print ads, radio commercials or tv commercials. Thats why online advertising is powerful. When someone clicks on the ad, its recorded and analyzed. If one ad is all yellow and no on clicks on it, and another one is red and everyone clicks on it...guess what ad you're going to see more of.

[disneysteve]

I was told in several Marketing classes that I had that 50% off all Marketing and Advertising is a total waste. Unfortunately, no one knows which half.

I have no doubt that the real figure is much higher than 50%, probably closer to 90%. I guess if the remaining 10% that "sticks" generates enough income to justify the 90% that gets ignored, the business plan makes sense.

I think online advertising is one of the most effective because it uses information from your computer history to place ads that specifically apply to your interests and business.

See now I find just the opposite to be true. I also see those "targeted" ads but they are comically worthless because they appear after I've already done whatever it was I was doing. For example, after I make a hotel reservation at Marriott, I start seeing a bunch of Marriott ads. How is that of any value? I've already made my decision. You don't need to try and sell me on Marriott now. And we constantly get ads for our daughter's college because we visit their website frequently. She's already a student there. Why do you see any value in advertising the school to me now? My daughter said she also sees those ads constantly on her computer and it always makes her laugh.

What about the people who buy a paper the day before Thanksgiving exclusively for the ads?

I think that's different. Ads that I intentionally seek out are different. A couple of months ago when we were shopping for a new refrigerator, I did look at the Sunday inserts from all of the appliance stores, for example.

Each click = money Although I cant quite figure out how the spam company makes money from each click on their ad.

I'm assuming they don't actually make any money from each click. They only make money from the 2 or 3% of clicks that result in a purchase. Like I said, if the revenue from thos purchases justifies the cost of the ads, I suppose it makes sense.

It's no different than junk mail. About 95% of our regular mail goes directly into the recycling bin unopened. Countless millions are spent on that junk every year, but there must be just enough people actually opening that junk and spending as a result to make it worth doing.

[rennigade]

Its called Pay per click advertising model.

Pay per click (PPC), also called cost per click, is an internet advertising model used to direct traffic to websites, in which advertisers pay the publisher (typically a website owner) when the ad is clicked. It is defined simply as “the amount spent to get an advertisement clicked

http://en.wikipedia.org/wiki/Pay_per_click#Flat-rate_PPC

Thats why I tell people not to click ads you see..or even when you do a google search usually the first results at the top is an ad (could be the exact thing you're looking for.) The difference is someone is getting paid when you simply click on the ad.

Also...I hate to beat a dead horse but if everyone would start using google chrome along with adblock...you would never have to worry about these ads. Good for us...bad for sites like this who may rely on users clicking ads so they can make money to support the site.

[riverwed070707]

Its called Pay per click advertising model.

Pay per click (PPC), also called cost per click, is an internet advertising model used to direct traffic to websites, in which advertisers pay the publisher (typically a website owner) when the ad is clicked. It is defined simply as “the amount spent to get an advertisement clicked

http://en.wikipedia.org/wiki/Pay_per_click#Flat-rate_PPC

Thats why I tell people not to click ads you see..or even when you do a google search usually the first results at the top is an ad (could be the exact thing you're looking for.) The difference is someone is getting paid when you simply click on the ad.

Also...I hate to beat a dead horse but if everyone would start using google chrome along with adblock...you would never have to worry about these ads. Good for us...bad for sites like this who may rely on users clicking ads so they can make money to support the site.

Why would you tell people not to click on them? You're against people making money? The website is the one that gets paid, which is why sites like saving advice can be free for users. If you like the site, and you'd like to continue to use it for free, wouldn't it actually work to your advantage to click their ads to support their business without having to give your own dollars?

[greenskeeper]

A company that doesn't advertise, will advertise when they are going out of business

[jIM_Ohio]

I was just reading that facebook is expected to have revenue of $17 billion this year, most of which comes from selling advertising space. Google also gets the bulk of its revenue from advertising. Almost every website you visit, including this one, features ads.

I just don't get it. I don't understand the business model behind this. I don't get how spending tens of billions of dollars benefits the companies that do this. I mean I understand how it benefits facebook and Google. They get the ad dollars. I don't understand how it benefits the companies placing the ads.

I have never and would never click on any type of online ad. I can't imagine why anyone else would either. Granted I see the ads (though I use an ad blocker now so I see a lot less of them), so I suppose that some companies see value in getting their name out there but is that really worth tens of billions? I wonder how much they spend on advertising vs. how much they generate in sales as a result.

Any advertising folks out there who can explain this?

Some ads are "pay per click" or PPC
some advertising is brand awareness
advertising also creates barrier to entry for new competitors

for example if a software company wants to compete with apple and microsoft, they need to advertise or no one will even know they exist

Ads can also be targeted- I see lots of ads on this page and other financial sites for RIA in a box- that is a consulting company to financial advisors. Based on your background, you may see other ads- it is brands being made aware to you, the 1 time in your life you need the service, you are aware of the brands which can help.

Much of marketing needs to be done before people need you. Then the one time they need you, you want to choose them- that is when it works.

[rennigade]

Why would you tell people not to click on them? You're against people making money? The website is the one that gets paid, which is why sites like saving advice can be free for users. If you like the site, and you'd like to continue to use it for free, wouldn't it actually work to your advantage to click their ads to support their business without having to give your own dollars?

Im just biased when it comes to anyone who profits from this I suppose. The CEO of the company I worked for at the time was an arrogant cocky foul mouthed human being. Although he was very business savvy and is now wealthy.

I remember one meeting that a bunch of us had to sit through where he dropped the F bomb around 20 times in a span of 5 minutes. He was really young and I remember adult employees he was singling out and they just had to sit there and take it...or lose their job. Ill never forget that. I lasted 2 months before being fired.

All of that just left a bad taste in my mouth. So you're right...I probably should not tell people to click or not click on the ads.

[disneysteve]

Why would you tell people not to click on them? You're against people making money? The website is the one that gets paid, which is why sites like saving advice can be free for users.

Interesting question. Almost a bit of an ethical dilemma there. But I am not willing to waste my time clicking on ads that I don't have the least bit of interest in just to support someone else's business. I love Saving Advice. I'm very glad that it exists and is free to use, but I'm not clicking on ads to help support it.

[Scanner]

I am no marketing guru but someone else hit it here. . .it works by targeting.

Instead of taking an ad out in the newspaper, radio or TV which is a shotgun approach (which works sometimes). . .my computer is creepily tracking everything I write.

For instance, DisneySteve, I am going to write "Genital Herpes" in this thread.

Let's not see if the computer Gods think I have it (lol -I don't). . .and if an ad for Valtrex pops up.

Voila. . .next visit to you, DisneySteve, you have a bunch of patients asking you about the benefits of Valtrex.