Online Advertising Revenue Models x4

With the rise of online advertising (now worth 10% of the $10 billion Australian advertising market), we discuss strategies your website can employ to earn money through online advertising.

3 Fundamentals of Online Advertising

First a refresher. There are 3 basic ways to advertise on a site: 1) Cost per 1,000 impressions (CPM), 2) Cost per Click (CPC) and 3) Sponsorship

Cost per 1000 impressions (CPM): This is the amount charged to an advertiser per 1000 views of an ad. Rates generally range from $30-$50 per 1000 impressions.

Cost per Click (CPC): This is when charges are only accrued when a user click on the ad which takes them to your website. Rates for these generally range from a few cents to a couple of dollars. This sort of advertising is popular with search engine companies.

Sponsorship: This is generally based on a finite time-period (e.g.. for a fantasy sports competition) or for a specific event (e.g. an email campaign to your customers). Generally, these are secured through your existing business relationships or managed via a PR/advertising team.

(UPDATE: Google have just announced a trial where advertisers only pay when a specific action is undertaken online. For example, you only pay when a customer who clicked on your ad then goes and purchases a product or submits a contact request. Read here for more details.)

4 Online Advertising Revenue Models

1. Share Advertising Revenue with your Contributors

The big trend that is generating a lot of interest is consumer generated media served from a central, well-branded website. Think YouTube, MySpace, Facebook and Flickr. These are sites that de-centralise (some say democratise) the process of creating content and placing the power back into the hands of the individual. This process is important because it is incredibly popular. Being popular means happy advertisers.

But what of smaller, niche sites such as blogs and forums? How can they compete with the big boys? As we have mentioned previously in our technology reviews, content is king. Focus on getting the right content for your audience. High quality content gets you loyal visitors. A niche market means that advertisers can target their message carefully. Focus on getting high quality content for a niche audience and advertising will follow.

So it begs the question – “How do I get great content?” One way is to pay experts to write about their industry, or build a great brand (see our article from Pandemonium for tips) that attracts experts. The other option, which offers some promise, is sharing advertising revenue with your writers. This is where YouTube, MySpace and blogs will head in the future.

Sharing advertising revenue with your writers/contributors works like this. Assume you have advertisement running on your website and you are using a cost per 1000 impression (CPM) model (See earlier discussion on CPM). Now, when a visitor reads, watches or listens a contributors’ content, the ad is displayed next to it. In normal run of events 100% of the ad revenue from that ad goes to the website operator. In the ad revenue share model, a cut (say 20%) will go to the contributor.

The great thing about this model is that it is self-correcting. A popular contributor will be encouraged to continue submiting more content because they are getting rewarded. A less popular contributor will be discouraged as they are not relating to the audience. Thus, the “cream rises to the top.” and thus improves your website’s popularity with your audience.

2. Podcasts

Advertising strategies for podcasts are more or less borrowed from their traditional media counterparts, radio and TV. Typically, short ads (less than 30 secs) are inserted into the start of a podcast. Again, subscriptions to podcasts can be tracked although it is a little harder to actually know how many people listened to it (SONAR recently released a media player that can track this sort of information).

3. Really Simple Syndication (RSS)

Really Simple Syndication (RSS) gives users the power to subscribe to a website’s news, new articles and new content. For example, this blog has an RSS feed. RSS feeds can be sent to a dedicated RSS Feeder (such as FeedDemon) or viewed on your personal Yahoo/Google homepage. It’s a great way to keep in touch across a number of websites without actually having to visit them - which is why they are very popular. Now this could be a website operator’s worst nightmare as the number of visits to your page could be threatened by this technology. However, RSS feeds can have advertisements embedded within each feed, thus providing a extra source of revenue. New ad service companies, such as FeedBurner, help website operators to embed advertisements in their feeds.

4. Google Adsense vs Yahoo! Publisher

One cannot talk about online advertising without discussing what the big players, Google and Yahoo! are up to. For the uninitiated, Google have a system to help customers earn revenue on their website, called AdSense. Google AdSense automatically serves advertisements (by you placing a small bit of code on your website) and will automatically display ads that are relevant to your website. When a user clicks on an ad, you get a share of revenue and Google gets a share.

The online world has been waiting for Yahoo!’s response to AdSense. Yahoo! offers an invite-only, BETA system called Publisher Network.

It is worth considering Google or Yahoo! Services to manage your advertising on your site. It’s very easy to set up either service and requires little management overhead.

Last Word

Using a mix of the above online revenue models can boast your site’s earning potential. But as with any media, it is important to understand who visits your site. How many unique visitors per week? What locations (country, state, city) do your visitors come from? What are the general demographics of your visitors? These are the basic questions that any advertiser will want to know. Create a media pack with all of your demographic information, rates and technical (size, format etc.) specifications. Make it as easy as possible for an advertiser to say “Yes” to advertising on your website.

        

US Government Technology Procurement

Did you know that in 2006, the US Government spent US$51,772,014,776 on technology products and services from the top 100 government technology contractors?

One aspect of the US economy technology businesses should know about and understand well is the US Government’s $200 billion market. Since the enactment of the United States Free Trade Agreement many businesses are now doing their own due diligence on US market dynamics.

Below you will find a general overview of the US Government’s spending on technology (in 10 sectors) and trends of the top 100 government technology contractors in 2004, 2005 and 2006. This data may be useful to identify prospective partnering opportunities in the competitive US Government procurement eco-system.

Please click the links below for a brief overview of the spending behavior across 10 tech sectors:

• Overview of the 10 tech sectors

• Communications Equipment

• Defence

• Engineering

• Hardware

• Services

• Resellers

• Satellite

• Software

• System Integrators

• Telecom

If you would like information on how you can obtain the full report, please contact us at info@jdrlegal.com.au.

        

Podcast: Licensing Structures

This podcast covers strategies on how to structure your licensing agreements.

Download the MP3 here. (Duration: 13:39)

        

Podcast: Using Escrow

This podcast covers some tips on using escrow agents to disclose your Intellectual Property.

Download the MP3 here. (Duration: 2:19)

        

Recent Legislative and Case Law Developments - Australia

A range of changes to the Australian Copyright Act came into force on a range of dates between 11 December 2006 and 8 January 2007.

• Protection for users has been given where use of copyright material is a fair dealing for the purpose of parody or satire;
• New sections 43C, 47J and 110AA permit copying and storage to different platforms for one’s own use – these exceptions are to be reviewed by 31 March 2008;
• A new section 109A permits domestic copying of sound recordings for the purpose of â€�format shifting’;
• Remedies have been enhanced to permit copyright owners to take civil action against commercial-scale electronic infringements, including the commercial facilitation of peer-to-peer file sharing and provision of hypertext links or downloads;
• The prohibition on circumvention of access controls has been strengthened both as to civil remedies and criminal penalties but the requirement that the access control represent a â€�technological protection measure’ against copyright infringement remains;
• Archives and libraries, schools and organizations for people with disabilities have been given further protection from copyright infringement where copying takes place for their legitimate purposes.

        

Recent Legislative and Case Law Developments - USA

The US Court of Appeals in the case Brooks-Ngwenya v Thompson and others (7^th Cir., 17 October 2006) denied relief to a person who claimed to be the copyright owner of certain material and that another party was using the material without her consent. Her claim was denied on the basis that the person claiming infringement had not registered the copyright in the material with the Library of Congress in the US.

Copyright is protected by federal law in the US, which requires the owner of the copyright to have registered the copyright with the Library of Congress in order to bring a claim for copyright infringement in US federal courts.

The US federal court is the only legal arena in which copyright matters are determined in the US.

Perhaps it’s time for creative talent, entrepreneurs and SMEs trading into the US to get Uncle Sam’s copyright stamp of approval…

        

Managing Collaboration Partnerships

How important are collaboration partners to the viability of your US business?

It is quite common to find US companies that engage in collaborations and development of new intellectual property with business partners. From as large as Proctor & Gamble, to the smallest start-up company, many companies operating in the US actively source part of their capabilities outside of their own company, or related subsidiaries.

Even if you will have a small operation in the US, it should be aware that potential competitors could be collaborating in innovative ways with their business partners to create new products and services and/or to change the way existing products and services are delivered, with the hope of adding value to your target market and gaining market share. Companies in the US are embracing new technologies, through business partner collaborations and open innovation (ie. proactively sharing intellectual property in order to provider different or better products and services than currently exist).

Companies competing in the US market are usually motivated by the stiff competition and want to stay ahead of their competition. You may choose to go it alone in the US without engaging partners, but, in this day in age when convergence of business models, shorter life cycles of products and services, and sophisticated supply chains operating in an increasingly competitive global economy, it makes sense to at least stay open to the possibility of needing to collaborate with business partners to develop intellectual property and leverage supply chains so that your target market is drawn to purchasing your products and services over those of your competitors.

Having other business entities with a vested interest in your company making money is critical to your long term scale in the US. It is often a productive way to expand business operations in the US by relying on the strength of collaborative partnerships, that are tied to useful networks and innovative intellectual property. Equally as important, is for you to choose collaboration partners that align with your views and approach to business.

Good collaboration partners could help you create or enhance products and services that break new ground by solving real issues for local customers in ways that no single company, with its own intellectual property could.

A good collaboration partner for you should have some of the following characteristics:

• Established goodwill and profile with relevant segments of the US market (customers and competitors);
• An innovative and creative culture;
• No major conflicts of interest with you or your existing business partners;
• A need and/or desire to work with you, beyond short term opportunities;
• Willingness to invest time, money and resources in the collaboration and development of your existing intellectual property;
• Focus and commitment to leveraging the partnership;
• Established, useful intellectual property that you do not have;
• Solid supply chain connections; and
• Physical presence and an operating history in the US market.

Just as you need to research relevant US market and customer dynamics, if you are to successfully compete in the US market you should also invest the time and resources to do adequate due diligence on potential collaboration partners as well as nurture the collaborative relationships in which you enter.

How should you measure your return on investment and return on effort in a collaborative partnership?

It is quite common for US companies to measure their return on investment in a collaborative partnership by monitoring the revenue generated within a certain time period (ie. 18 months from commencement of partnership), as measured against a minimum target. Some US companies measure performance and market opportunities on a rigid financial basis. It is not unusual for companies to require an order of magnitude of new revenue equaling 100 times their initial investment of time, money and resources, within a defined period of time.

Other ways you could consider measuring the return on investment of a collaborative partnership is to look at:

• The amount of research and development dollars invested over time;
• The number and nature of jobs retained and created; and
• The amount of export revenue for products and services generated.

Whilst many companies measure their return on investment, it is less common (but just as important) for you to measure your return on effort.

Return on effort can be measured by you if you monitor:

• How easy is it to work with a collaboration partner;
• How well do the partners manage and minimize disputes;
• How long does it take from initial commercial discussions to signing a collaboration and/or joint venture agreement;
• How quickly does the partnership move in the right direction vis-a-vie its competition;
• Whether it is truly a “win-win” relationship;
• The amount of productive time spent physically together;
• Ability to securely share, access and build upon vital intellectual property and related sensitive information;
• The ability to initiate new directives that emerge from periodic strategic and relationship reviews; and
• Whether there continues to be a solid trust and business relationship beyond the short term.

In measuring return on investment and return on effort it is important for you to be practical and realistic, but, to measure the things that really matter to your long term business success.

How can you affectively manage a cross-boarder collaborative relationship?

It is often useful for a company to incrementally monitor the progress and success of its US market entry strategy. You should adopt a rolling 90 day review of your collaborative business relationships to determine whether desired milestones are being met.

You should track the progress of your business model, which may include organic growth as well as the use of distributors, franchisees, agents and licensees. It is important for you to understand, on an ongoing basis, relevant market opportunities that emerge, customer changing needs and wants, customer awareness of your product and service offerings and competitor dynamics.

There are other important business issues for a collaborative partnership, that should, but, are not frequently measured on a rolling 90 day basis, including:

• Whether a collaboration is attracting profitable deals;
• The size of the deal pipeline;
• Ratio of deals negotiated versus deals completed;
• Ability to leverage operational infrastructure, including technology resources;
• Value based engagements with external advisors (eg. lawyers and accountants);
• Managing and resolving disputes; and
• Leveraging the collective body of knowledge.

How can collaborating help you compete against value-driven competitors?

Often value-driven competitors compete strongest on price. You will need to establish and maintain a suitable response to the efforts of value-driven competitors to gain market share.

In addition to useful intellectual property, a good collaborative partnership will also give you access to better manufacturing processes, established supply chains and useful marketing and advertising channels, all of which are necessary to compete with value-driven competitors. Collaborative partnerships also have the potential to develop higher value propositions, greater than price, by building better products and services solutions, bundling offers as well as providing customers with a better buying and service support experience.

        

4 Predictions on The Future of Search

This article provides 4 predictions of where search is headed and how it will add to the user’s search experience. 

1. Corporate Search

Generally speaking it is easier for people to find information on the web than it is on their own corporate intranet. Finding the right documents and information quickly and without having to trawl through various directories and database is a must. We will continue to see companies battle it out in the corporate sector. Not surprisingly, Google, have an enterprise solution where a Google-designed server is simply plugged into the intranet and goes to work indexing documents. Two industry heavyweights, IBM and Yahoo! have teamed up to introduce OmniFind, a software-based enterprise search solution to compete in the corporate market. 

2. Location, Location, Location

With the rise of mobile phones, wireless hotspots and GPS, users will demand location-based search. Although we are in a globalised economy, people are yearning for that sense of local community. Look out for the major search engines to push “local search” (Eg. Yahoo! Local). Also watch out for mobile enabled search with the capacity of searching local businesses and even “finding a friend” in a crowd.

Sensis.com.au claims to enhance their search by integrating their Yellowpages, Whitepages, CitySearch and TradingPost assets to serve up local results. Businesses will be (and already have) begun to take a localized approach to advertising, rather than a “shot gun” approach characterized in the early days of online advertising.

3. Business Linkages

Have you ever tried to find a business partner via the web? Currently, search engines allow you to find companies, but not the right person in that organization to contact. This is where search and social networking will merge. So in the future, we will see a lot more business linkages between key decision makers within companies. A great example is LinkedIn, where you can search through and get introduced to a range of professionals from around the world. It’s not one big marketplace, where anyone and connect to everyone. You still will need to use your online network to establish contacts, just like you would in the physical world, to facilitate business connections.

4. Video and Podcast search

With the emergence of multiple forms of media out in the web, consumers will demand easier search of non-text based information. There are search engines that specialize in video and podcasts but they only search the “meta-data” (that is, information, tags and categories that accompany the media). Future research will focus on the search of the actual content of the media, by analyzing the media stream, extracting relevant information and keywords, index it and make it searchable. If this is achieved, this will help both the producers and consumers of content to connect to one another.
 

Final Thought

Humans have and always will need information. We will always place a premium on finding it.  But let us not confuse information with knowledge, nor wisdom for that matter. Knowledge and wisdom will continue to remain the defining human advantage over machine. So be it.

        

How does Search Work? 5 Tips on Improving your Website’s Ranking

This article gives a basic overview of how search engines work and tips to improve your ranking.

Yahoo!’s original strategy

In the beginning, Yahoo! started as a student hobby by David Filo and Jerry Yang, who in 1994 decided to keep an online list of interesting websites. As their list grew, they decided to put those links into categories, and sub-categories, and so on. This is important as this dictated their general approach to advertising – businesses pay to be listed within a certain category. Think of early Yahoo! as the YellowPages of the Internet world. Over time they developed search algorithms to trawl their listings (and then the web at large) for interesting websites.

Google’s approach

Like Yahoo!, Google was spun out of Stanford University by two PhD students: Larry Page and Sergey Brin in 1998. Their approach was to not to categorise websites but to rank them based on their popularity. On a basic level, website’s popularity is based on how many other websites link to them. So the more your website is linked by others the more popular you are and thus your website will be ranked higher than others.

As Google’s search engine evolved, their algorithm ranked “main stream media” websites (eg. News.com.au or cnn.com) as having higher quality content. So if your website is linked from these high quality sites, your ranking improves and you start to shoot to the top of Google’s search rankings. User’s found that Google’s method of indexing and ranking websites extremely useful in getting to relevant information on a consistent basis.

How do you get onto search engines?

There are a number of strategies to improve your website’s “popularity” ranking on search engines.

1. Content is king

Many people focus on “tricks” to fool search engines. Your primary strategy is to continually improve your website content. Make your content so interesting and so compelling that other website operators and bloggers want to link to you.

2. Write articles for the main stream media.

This is easier said than done. But take any opportunity to write opinion pieces or give interviews to the main stream media. Get them to provide a link to your website. The search engines will give your website a boost.

3. Participate in online forums

Find online communities in your areas of interest. Participate, but don’t “spam” your message. Make sure your website or business solves a need that is being discussed in the forum or blog.

4. Meta data

Make sure that you include meta data and meta tags to your website. This “meta” information helps search engines understand the content of your webpage and thus helps connect searchers to you. Ask your website operator to make sure that these are up to date and relevant to every page of your website.

5. Free press releases

There are a number of free press release services out there. Do a Google search for them. It’s one way to promote your site and getting links to your site.

        

Australian Innovation, A Shoot Out

The best of 21st century Australia were showcased in a full day of activities during G’day New York at the Sheraton Towers New York on January 17, 2007. The day addressed Australian advances and US collaboration opportunities in innovation, investment, science, education and research. The Invest Australia luncheon for invited business executives included a panel of successful business leaders and featured the former US Deputy Secretary of State, Ambassador Richard Armitage and the Foreign Minister of  Australia, the Hon Alexander Downer, MP.

To kick off the day, six finalists will compete in Australian Innovation, A Shoot Out. Each finalist won a  competition in their respective home state in 2006 and will fly to New York to present their company at G’day USA.

jdrlegal provided state finalists with a 1 hour session with each of the 6 finalist companies from their respective states providing a strategic overview of legal and commercial issues in expanding a business offshore from Australia. jdrlegal also provided a 3 month IP Help Desk subscription to the winner of the Shootout.