By Gerry Blackwell
The Internet has turned traditional advertising on its ear, as successful e-tailers like Daniel Thralow, CEO of Thralow Inc., learned very quickly. With traditional advertising, you could never be sure if anyone saw or paid attention to your message. But services like Google AdWords, upon which small business owners, including Thralow, have built their businesses, target your message to qualified prospects and tell you exactly how well it's received.
"One of the biggest problems I had [before the Internet] was measuring my marketing return," Thralow says. "I would buy newspaper, radio and TV ads — even billboards. Sales might go up maybe five or 10 percent, but I didn't know why. Because I was a better sales person, because I had more inventory? Or was it because the ads were working? It always frustrated me not to know for sure if I should keep spending the tens of thousands I was spending on advertising."
He now spends well over $2 million on advertising and has no such qualms about its effectiveness.
When Dinosaurs Roamed the Internet
In 1994 when Thralow first began reading and getting excited about the potential of Internet retailing, he was selling sunglasses from a small chain of brick-and-mortar shops in northern Minnesota. He opened his first Web store, Sunglasses.com, in 1997. It was a qualified success. Because sunglasses are a fashion item and people like to try them on before they buy, the return rate was a profit-gobbling 10 percent. So he looked for something else that would "fit better with the Web and dovetail with what we were already doing."
His first pure Internet venture, launched in 2001, was Binoculars.com, which today grosses over $10 million a year. Telescopes.com launched in 2002 and generates revenues of about $8 million. He still has Sunglasses.com, and it's profitable but relatively small. One of the retail outlets remains. Basically a local showroom for what he sells online, it accounts for less than one half of one percent of sales. This year Thralow Inc., which employs 30 people, expects to post about $21 million in sales.
It's a long way from the debt-ridden brick-and-mortar business he was operating back in 1996.
He attributes much of that success to the effectiveness — and measurability — of Internet advertising, specifically search-engine advertising. AdWords, as with other such services, displays your ad and a link to your site on the search page whenever anyone performs a search that includes keywords or phrases for which you have agreed to pay. You pay the agreed fee each time anyone actually clicks on your ad.
I'd Like to buy a Vowel
Google and other such companies auction keywords because multiple vendors may want to use the same ones. Individual words and phrases draw bids ranging from a few cents to over $20. The company allows a limited number of ads per search and your position in the list of ads on a page is determined by how much you bid — highest bidders get the best position.
Thralow knows exactly what his return is on the investment in AdWords because he uses cookies to track where his customers go on the site after arriving from a Google search page. Even if they don't buy on that first visit, but come back 45 days later and complete a purchase, he knows that they came to the site originally by clicking on a Google ad. It means he can track the success rate — not just of AdWords in general but of individual keywords.
With Google AdWords, he knows that every dollar he spends returns on average $3 — of profit. Compare that to the 60 cents profit-per-dollar-spent he received for magazine advertising. Buying keywords at shopping search sites such as PriceGrabber.com and DealTime delivers an even better return, but not anywhere near as much traffic.
Google, largely because of the enormous traffic it generates, is the single biggest item in Thralow's advertising budget — about $750,000 this year, representing 35 percent of his total ad budget. It's a tribute to the importance of Google, but it makes Thralow a little uneasy. "To me that's a big egg in a single basket," he says. "You never want to be too dependent on any one form of marketing, anymore than you want to be too dependent on any one customer."
Thralow also spends a significant chunk on Yahoo Search Marketing and other search engine advertising services, as well as pay-per-click ads elsewhere on the Web, sponsorship of related sites such as Birderblog.com and Amazon-like affiliate programs that pay a commission to other sites that sell Thralow products.
All Words are Not Created Equal
Thralow currently pays for thousands of search words and phrases, and the number is growing all the time. Two employees spend much of their time researching words that might bring customers to the company's sites, selecting new words and tracking their effectiveness. Much of the research involves mining data about how customers use the search function at the Thralow sites to look for products once they get there. There are also software tools available that help businesses select keywords.
Thralow learned early on to choose fairly specific words and phrases. For example, rather than bidding for the word 'Canon' — Canon being one of the best-selling brands of binoculars — he'll buy 'Canon binoculars' or even 'Canon 10X30 Image Stabilized.' "If you used just Canon," he points out, "you would also get camera buyers."
As long as a word or phrase at least breaks even, he'll keep it, on the assumption that many of the customers who come to the site via that word will return in the future and spend more.
It's not just that you can track the effectiveness of your marketing and advertising on the Internet, Thralow points out. You can also experiment with and test marketing initiatives and find out very quickly and cost effectively whether they'll work or not. "If it's working you keep doing it, if it's not, you stop and cut your losses," he says. "You can run a campaign in half an hour and know within a day if it's working or not."
His company will try almost any Internet marketing ploy — or keyword — once, he says, however silly it may seem. One of the things he has learned about search engine advertising and Internet advertising in general is that you must test before making any long-term or high-cost commitment, and you must have a budget for the test commensurate with the potential return.
The beauty of Internet advertising is that you can test quickly and precisely and twithout much risk. "As long as it fits the budget — as long as it can't put us out of business — and as long as it's measurable, we'll test anything," Thralow says. "If it works after we test, have at it! If it doesn't, well, we know we don't need to do that one again."
Bidder, Bidder, Bidder
He and his people have also learned some tactics around bidding for AdWords. For example, if one competitor buys the same keyword at $1.99 and another at $1.10, Thralow may see a better return on investment by bidding $1.11 to ensure second ranking rather than outbidding the top bidder. The company has even worked out some equations for calculating ROI at given bids. "We call it surfing the gaps," he says. "Sometimes there are big gaps in [bid] position." Some search engine ad services let bidders see what others are bidding. With others, like Google, Thralow has to deduce it by test bidding.
The company spends big bucks on Google AdWords but Thralow has reservations about the service — besides just the fact that he has so much of his ad budget committed to one supplier. He's not convinced that Google has the best mechanisms in place for detecting fraud, or that it spends enough resources on tracking fraud. On the other hand, as long as the ROI on AdWords remains high, it isn't a serious enough objection to keep him away, he concedes.
He's also annoyed about a Google rule that precludes him bidding twice on a single keyword so that he can have two ads on the same search page, one sending people to his main Telescopes.com page, for example, and another sending them to a niche marketing page such as Telescopes4Kids.com. Google wants to stop porn and gambling sites from buying up keywords so that no other ads appear on search pages. "I think they threw the baby out with the bath water," Thralow says.
However, he admits he'd be interested in any new advertising opportunity Google might offer in the future — including a rumored new classified ad offering. "We're always interested in anything they bring out," Thralow says.
Based in London, Canada, Gerry Blackwell has been writing about information technology and telecommunications for a variety of print and online publications since the 1980s. Just for fun, he also authors features and columns on digital photography for Here's How, a spiffy new Canadian consumer technology magazine.
This article originally appeared on SmallBusinessComputing.com.
Friday, December 02, 2005
Focus Media has Dominant Market Share in Commercial Location Audiovisual Advertising Market in China
SHANGHAI, China /Xinhua-PRNewswire/ -- Focus Media Holding Limited (Nasdaq: FMCN - News), the operator of the largest multi-platform out-of-home advertising network using audiovisual television displays and in-elevator poster frames in China, today announced that Focus Media's commercial location network covers on average 82% of top 100 commercial buildings in China's ten most important cities, according to Nielsen Media Research study on China's out-of-home LCD advertising market.
Nielsen Media Research surveyed the top 100 commercial buildings in each of Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, Chengdu, Wuhan, Nanjing, Hangzhou and Chongqing, based on data by Collier International Property -- the world's largest property management company. The study surveys the number of LCD displays that are installed and owned by an independent media company for broadcasting advertisements. Of the 1,000 top commercial buildings surveyed, the study showed that the LCD advertising network has penetrated into 939 buildings and Focus Media's commercial location network covers 818 buildings. In Beijing and Shanghai, the LCD penetration rate of top 100 commercial buildings has reached 88% and 91% respectively, while Focus Media covers 81% of the top 100 commercial buildings in Beijing and 86% of the top 100 commercial buildings in Shanghai.
Ms. Rita Chan, Client Service Director of Nielsen Media Research said, "LCD advertising in commercial locations has become a very important media for advertisers who want to reach the higher-income consumer segment in China."
Mr. Jason Jiang, Chairman and CEO of Focus Media commented, "Among various commercial locations, top commercial buildings carry the most distinguishing segmentation features as they are must-go locations and most populated with white-collar business professionals. Our advertising clients view the top commercial buildings as the most important and valuable real estate for targeting the more affluent urban consumers created by the fast-growing Chinese economy. This study further proves that Focus Media's commercial locations network is the market leader in our industry."
About Focus Media Holding Limited
Focus Media Holding Limited (Nasdaq: FMCN - News) operates China's largest multi-platform out-of-home advertising network using audiovisual television displays and in-elevator poster frames. As of September 30, 2005, Focus Media had over 55,000 display units in our commercial location network and in-store network throughout China. Focus Media's network consists of flat-panel audiovisual displays placed in high traffic areas, such as elevator lobbies of commercial buildings and large retail chain stores. Over 1,200 international and domestic advertisers have placed advertisements through our networks as of September 30, 2005. For more information about Focus Media, please visit our website http://ir.focusmedia.cn .
Nielsen Media Research surveyed the top 100 commercial buildings in each of Shanghai, Beijing, Guangzhou, Shenzhen, Tianjin, Chengdu, Wuhan, Nanjing, Hangzhou and Chongqing, based on data by Collier International Property -- the world's largest property management company. The study surveys the number of LCD displays that are installed and owned by an independent media company for broadcasting advertisements. Of the 1,000 top commercial buildings surveyed, the study showed that the LCD advertising network has penetrated into 939 buildings and Focus Media's commercial location network covers 818 buildings. In Beijing and Shanghai, the LCD penetration rate of top 100 commercial buildings has reached 88% and 91% respectively, while Focus Media covers 81% of the top 100 commercial buildings in Beijing and 86% of the top 100 commercial buildings in Shanghai.
Ms. Rita Chan, Client Service Director of Nielsen Media Research said, "LCD advertising in commercial locations has become a very important media for advertisers who want to reach the higher-income consumer segment in China."
Mr. Jason Jiang, Chairman and CEO of Focus Media commented, "Among various commercial locations, top commercial buildings carry the most distinguishing segmentation features as they are must-go locations and most populated with white-collar business professionals. Our advertising clients view the top commercial buildings as the most important and valuable real estate for targeting the more affluent urban consumers created by the fast-growing Chinese economy. This study further proves that Focus Media's commercial locations network is the market leader in our industry."
About Focus Media Holding Limited
Focus Media Holding Limited (Nasdaq: FMCN - News) operates China's largest multi-platform out-of-home advertising network using audiovisual television displays and in-elevator poster frames. As of September 30, 2005, Focus Media had over 55,000 display units in our commercial location network and in-store network throughout China. Focus Media's network consists of flat-panel audiovisual displays placed in high traffic areas, such as elevator lobbies of commercial buildings and large retail chain stores. Over 1,200 international and domestic advertisers have placed advertisements through our networks as of September 30, 2005. For more information about Focus Media, please visit our website http://ir.focusmedia.cn .
Google sees higher online advertising budget
By Eric Auchard
New York - Corporate marketers have made online advertising a standard part in media budgets as online spending looks set to accelerate further in 2006, Google's North American sales chief said late on Tuesday.
Tim Armstrong, Google's advertising sales vice-president, said in an interview before the Reuters Media and Advertising Summit that 2005 marked the turning point when advertisers switched from testing to investing in the decade-old medium.
"There is robust interest in online advertising and that interest is now turning into real dollars," Armstrong said, noting that market analysts are predicting a banner 2005 year with forecasts ranging from $10-billion to $15-billion (R65-billion to R97-billion).
'Corporate ad buyers are investing now'
"The experimenting and testing phase begun in the 1990s has ended. Corporate ad buyers are investing now," he said.
Jupiter Research estimates the US online advertising market will grow 28 percent during the course of last year, to $11,9-billion in 2005 to $13,6-billion in 2006 and $15,1-billion in 2007.
By contrast, Google, which dominates the fast-growing market for keyword-search advertising, has been growing at three times the industry rate, or around 100 percent a year.
Industry estimates put Google's market share at 30 percent of overall online ad spending, with as much as 40 percent of the category it dominates - paid search.
Armstrong said two factors are driving the race to boost budgets. Consumer adoption of the Web has far outpaced advertisers commitment to the medium. More recently, Madison Avenue executives have begun advising clients to close the gap by committing more dollars online, Armstrong said.
The budget shift is benefitting not just Google but Yahoo and Microsoft's MSN, he said.
The acceleration of online ad budgets can be measured by the increasing number of companies marketing through online channels, the growing number of divisions within each company using the online medium and the percentages committed online relative to other media, the Google executive said.
While estimates vary, analysts believe around five percent of US advertising dollars will be spent online this year, up from around two percent just a couple of year ago. In short order, 10 percent or more could move online, analysts say.
"Some are putting 10 percent or even more than 10 percent of their 2006 budgets into online," Armstrong said. By no means all companies are at this stage, he said but the tide has turned.
Google is making progress on its strategy expanding beyond keywords to offer advertising anywhere, Armstrong said.
"We started with text, we now offer graphic ads and are moving into print advertising," Armstrong said. Google has been selling print advertisements in a select number of technology trade publications and are talking to major publishers about expanding this approach across a variety of niche markets.
Video advertising will be a natural extension of these existing efforts, part of Google's long-term strategy to offer relevant advertising wherever possible.
Google's accelerating growth is being driven by brand advertising and site-targeting campaigns that extend beyond its core keyword advertising business, Armstrong said.
Executives of the Mountain view, California company have previously said that more than 25 of the top 100 online advertisers are using its site targeting tools, which allow advertisers to create custom ad campaigns on hundreds of the most relevant sites to a specific message.
Armstrong declined to say how many more of these major advertisers had adopted its site-targeting tools, saying only that, "We have seen continued growth within those major advertisers."
www.int.iol.co.za
New York - Corporate marketers have made online advertising a standard part in media budgets as online spending looks set to accelerate further in 2006, Google's North American sales chief said late on Tuesday.
Tim Armstrong, Google's advertising sales vice-president, said in an interview before the Reuters Media and Advertising Summit that 2005 marked the turning point when advertisers switched from testing to investing in the decade-old medium.
"There is robust interest in online advertising and that interest is now turning into real dollars," Armstrong said, noting that market analysts are predicting a banner 2005 year with forecasts ranging from $10-billion to $15-billion (R65-billion to R97-billion).
'Corporate ad buyers are investing now'
"The experimenting and testing phase begun in the 1990s has ended. Corporate ad buyers are investing now," he said.
Jupiter Research estimates the US online advertising market will grow 28 percent during the course of last year, to $11,9-billion in 2005 to $13,6-billion in 2006 and $15,1-billion in 2007.
By contrast, Google, which dominates the fast-growing market for keyword-search advertising, has been growing at three times the industry rate, or around 100 percent a year.
Industry estimates put Google's market share at 30 percent of overall online ad spending, with as much as 40 percent of the category it dominates - paid search.
Armstrong said two factors are driving the race to boost budgets. Consumer adoption of the Web has far outpaced advertisers commitment to the medium. More recently, Madison Avenue executives have begun advising clients to close the gap by committing more dollars online, Armstrong said.
The budget shift is benefitting not just Google but Yahoo and Microsoft's MSN, he said.
The acceleration of online ad budgets can be measured by the increasing number of companies marketing through online channels, the growing number of divisions within each company using the online medium and the percentages committed online relative to other media, the Google executive said.
While estimates vary, analysts believe around five percent of US advertising dollars will be spent online this year, up from around two percent just a couple of year ago. In short order, 10 percent or more could move online, analysts say.
"Some are putting 10 percent or even more than 10 percent of their 2006 budgets into online," Armstrong said. By no means all companies are at this stage, he said but the tide has turned.
Google is making progress on its strategy expanding beyond keywords to offer advertising anywhere, Armstrong said.
"We started with text, we now offer graphic ads and are moving into print advertising," Armstrong said. Google has been selling print advertisements in a select number of technology trade publications and are talking to major publishers about expanding this approach across a variety of niche markets.
Video advertising will be a natural extension of these existing efforts, part of Google's long-term strategy to offer relevant advertising wherever possible.
Google's accelerating growth is being driven by brand advertising and site-targeting campaigns that extend beyond its core keyword advertising business, Armstrong said.
Executives of the Mountain view, California company have previously said that more than 25 of the top 100 online advertisers are using its site targeting tools, which allow advertisers to create custom ad campaigns on hundreds of the most relevant sites to a specific message.
Armstrong declined to say how many more of these major advertisers had adopted its site-targeting tools, saying only that, "We have seen continued growth within those major advertisers."
www.int.iol.co.za
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