May 24, 2019 • 43 mins
How does Web advertising compare to traditional advertising? What do the terms CPM, CPA and CPC mean? How do affiliate programs work? Join Chris and Jonathan as they explore the nuts and bolts of online advertising.
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Episode Transcript
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Speaker 1 (00:04):
Welcome to tech Stuff, a production of I Heart Radios
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland, and I'm an executive producer
with How Stuff Works and I heart Radio and I
love all things tech and it's time for a classic
episode of text Stuff. This episode, originally published on June twenty,
(00:29):
two thousand twelve, awful close to my birthday, is called
tech Stuff Clicks on Web Ads, And as the name suggests,
Chris Pallette and I sit down to talk about web
advertising and how web advertising works and the whole revenue
model behind it. So I hope you enjoy this episode.
(00:51):
You like stuff on the web, right? Yeah? I mean,
you know, both of our careers depend heavily, uh. In fact,
I would say entirely upon upon putting stuff up on
the web. And the reason why we're able to do
that is because we can make money by putting stuff
up on the web. Yes. And the reason why we
were able to make money putting stuff up on the
(01:12):
web stems mainly from advertising, yes, And so we wanted
to talk today a little bit about web advertising. We've
covered the subject a little bit in previous episodes, but
we really wanted to kind of dive into it. And
advertising has a bad rap, and part of that is
because advertisers have sometimes used very invasive, intrusive or manipulative
(01:36):
approaches to try and get ads in front of you. Yes,
and I'd like to point out that this episode is
brought to you by Chocolate Nibbles now with nine essential
vitamins and minerals. Yes, we got rid of that other
non essential vitamin and mineral. Yes, just it was looking
at us funny and we didn't like its face. But now, yeah,
we're talking about web advertising and there's good points to
(01:58):
it and bad points to it. Now, the good points
are that without web advertising, you'd have to find some
other way to make money putting content up on the web,
or else people wouldn't do it, or at least not
as many people would do it, and certainly not you
wouldn't see the same level of quality across the web.
There there'd be, you know, occasionally, there'd be someone who
would be amazingly talented, who for altruistic reasons, wants to
(02:23):
share what he or she has come up with on
the web. And those people will be amazing and their
content they create would be phenomenal, and it would all
be done, you know, the effort and the time being
put in would all be that one person's resources, and
that would be fantastic. Chances are it wouldn't be their
day job though, because they wouldn't be since you weren't
(02:45):
making money off of it. They've got to eat somehow,
so they would probably be doing something else for forty
hours a week. And then you think about all the
sites you regularly go to, a lot of those sites
are supported through advertising, and so without the ads, those
sitestone exists, which means that content that we have grown
so fond of accessing would no longer be there. So
(03:06):
in that case, advertising plays a very important role. Now,
of course, you can you can make money with online
through other ways besides advertising. You could have a subscription
based service where people have to pay a certain amount
per unit of time, usually be monthly, but it might
be you know, six months or a year or whatever.
You can't even do it smaller units if you really
(03:27):
wanted to um and make money that way by saying,
all right, well, you can access the content we create
on this site if you pay this amount of money
per this unit of time or or per article some, Um,
some sites do that, you know where you have Hey,
if you want to read this article, then it will
be to to read this one particular story, right. And
(03:51):
the thing is that the way the web has developed
over time, people have grown to expect free access us
to something if it's on the web. Yeah, it's a
cultural thing. Yeah. The early days of the Internet, I
mean that the people who were doing this were government
institutions in the United States and higher learning you know,
(04:11):
colleges and university so the the content online was specifically
for those groups and the commercial entities really weren't involved
in it in the early days. So the people who
were doing that or or actually you know, some of
it is from the online services UM. So if you
had a modem, you could dial up to a bulletin
board and you may not have to pay a fee,
(04:33):
and you would join the community there and swap stories
or you know whatever it is that they talked about. UM.
But they didn't they might pay a fee, a subscription
fee to join the BBS or for internet access in
the early days of the Internet as a commercial sense, UM,
but they wouldn't be paying for the content. And so
(04:55):
the idea came about that web advertising could potentially be
far more effective than traditional forms of advertising. That was
the initial thought, and the reason for that was that
if you buy an ad in a magazine, or you
put on a billboard, or you put in a television show,
it's a in the ad breaks you have a reasonable
(05:18):
expectation of a certain number of people that ad is
going to, UH is going to connect with. Now, whether
those people are paying attention to the ad, you don't
know whether if whether or not they pay attention to
the ad and then go forward and actually act based
upon what they saw in the ad. You don't know
that either, but you you what you do know is
that a certain number of people, based upon the market research,
(05:41):
are going to see that particular ad. Actually, this seems
like a good time to bring up a point that
there are two major types of advertising we're talking about
here too. Um. Direct response is the type of advertising
debt does encourage you to do something like if you
were going to UH listen to the podcast and suddenly
now you're craving a bowl of chocolate nibbles and let
(06:03):
me tell you they are delicious. Um, now we got
rid of the non essential vitamin mineral. Yes, you should
run out and buy something. That's the point of an
advertisement like that. UM. Then you have what they call branding,
which is basically, you know, hey, you don't have to
go run out and buy our product. Just think of
us the next time you're doing something like that. And
(06:25):
that's the kind of thing that you see like at
um uh sporting events. UH. For example, the ads on
the sides of hockey boards or on on the sides
of race cars. They don't say by you know, such
and such product. They're just showing you the brand name,
so that you sort of think about them and you're
you're thinking, oh, well, you know, I like these guys.
They sponsor my favorite driver. Yeah. The idea might be
(06:48):
to get that brand name in your mind so that
the next time you go out to get something, you
actually think about that particular brand. For example, you might think, hey,
I'm thirsty, I would like a soda. I just saw
that ad for coke, and maybe I wouldn't normally get
a coke, but that sounds good to me right now,
I'll go ahead and get a coke. UM. So it's
it's one of those things where getting the brand out
(07:10):
there is really important, and marketers will tell you how
important that is that you know, you don't want to
mess with your brand, You don't want to change your
brand identity to drastically unless you do it in the
right way so that you make it a sort of
a public event where people will make that transition with you,
because it's you know, this is stuff that's sticky in
people's minds. Yeah, there are people who are going to
(07:32):
walk into the store and they're going to see that
brand name that they know so well, um, and they're
going to choose a product from that manufacturer simply because
they know the name. They might see it next to
something else that they've never heard of and go, well,
at least I know who these people are. So that's
just basic advertising. Now, if you're talking about the web,
the the the advantage, or at least the apparent advantage
(07:55):
back in the early days, was that you could actually
monitor what people were doing based upon the webs you were,
the the ads you were serving up on the web. Brother,
So let's say that you go and you put an
ad on a really heavily traffic site in the early
days of the Internet, so Yahoo. Let's say, um, you
put an ad up on Yahoo. Well, you already know
that a certain number of users and the millions perhaps
(08:19):
visits Yahoo each day, so you know that that that's
how many people are going to see your ad, and
and the websites track their statistics so that they can
report back to advertisers. Hey, if you advertise with us,
you will reach at least two million people. Right, this
is how many This is how many unique visitors you
will see. Yes, this is how many people actually have
(08:39):
page views. Because the two things are different. Yes, we
talk about that in a minute. Yeah, so at any rate,
because the early days of the web advertising, they were thinking,
why is this any different from say a magazine Apart
from the fact that we can actually give you more
data about the people who are taking a look at
this ad, um, it should be the same price, and
(09:00):
in the beginning it was. But here's the Here a
couple of problems. One is that it also let you
know when people were not uh reacting to an ad,
at least not actively reacting to an ad. So, in
other words, if no one's clicking on the ad, or
if it's a really really really small number of people
(09:21):
who are clicking on the ad, then you question was
the value of that ad right, Because if no one's
going converting over and clicking through, then the advertisers say, well,
why are we spending the same amount of money we
would for a magazine ad or a television ad if
this if only these few people are clicking through. Never
(09:41):
mind the fact that we can't be sure how many
people see the magazine add or television ad and react
to it, that doesn't matter. They're saying, well, we have
a proof here that not that many people are clicking through,
so therefore this is overvalued. That was one problem. The
other problem was that lots of websites were popping up.
That meant there was a lot of landscape for advertising.
(10:04):
So with lots and lots of websites of various degrees
of popularity popping up on the web, that devalued web advertising.
It's like a supply and demand thing. So, for example,
imagine that you have a stretch of highway and there
are three billboard signs up, and they're only three, and
(10:25):
those three are would be a certain value to be
able to advertise on them, because that that's the only
three that any drivers are going to see. Well, then
let's say fifteen new billboards pop up along that same
stretch of highway. Well, that's just devalued the the value
of the three that already existed there. Yea. And that
can actually happen on a site too. It's not just
(10:46):
across the the web. If you put up so many
ads that uh, it sort of drowns out the content.
People begin to tune them out, and your your message
loses its power. So it's a very delicate balancing act
is figuring out where the place ads, what sort of
ads you use, how many do you have per page?
And it's not just a balancing act of turning off
(11:09):
readers or turning off visitors from going to your site.
It's also a question of how much money does it
cost to run your business and how can you offset
that through advertising? If that's your chief way of generating revenue.
You have to find that balance. And it's tricky because
you know, you, if you're talking about the ads themselves
are being devalued the more they're out there. Then you
(11:32):
have to balance that out, like how do you take
advantage of advertising in such a way that you're actually
making enough money to sustain whatever your business you're in, right,
and uh, and it's not easy to do well. And
it it's worth pointing out I think too that um,
to some degree, the web is a fairly inexpensive place
to do business. Buying a domain name, arranging hosting for
(11:56):
a year, um, you know, that's that's not terribly expensive.
You start getting into, uh, some cost problems when you
generate a lot of traffic to the site, because in
a lot of cases, say, if you you're just a
person who wants to start a blog just for the
sake of starting a blog, and you promote it to
your friends on Facebook, and you get a couple of
(12:18):
gigabytes worth of bandwidth per month, that's probably not going
to and that's a lot of traffic just you know,
for for a person with a blog who's just having
fun with it. Um, you know, you might decide to
stick some ads up there. But and and that may
very well offset the cost because you're web hosting provider.
A lot of them these days don't charge uh for
a certain amount of traffic. Now, if you're somebody like
(12:42):
a magazine or streaming media side or something like that,
that's going to generate tons and tons of traffic, and
the web hosting provider is gonna say, hey, look, pal,
you know, if you're taking up room on our servers,
you want yeah, if you want the band with, you
gotta pay. Yeah, So know, you have to pay people
to run the side and maintain the side. If you're
(13:04):
a magazine, you want to pay writers, maybe freelancers, editors.
You know, you're gonna have a lot of people working there,
so you have to pay for them too, and then
you have to generate more revenue to offset that. So
it's it's relatively inexpensive to get in, but depending on
the scale of the operation, you might need serious money
to keep it going right. And you know, we when
(13:24):
we talked with Bernie Burns of Rooster Teeth, Yeah, you
know he talked about back in the early days of
Rooster Teeth, that was before streaming video was a thing
on the web. So what people would do is they
would actually download an episode of Red Versus Blue, Right,
So they're downloading video files. And because it became so
popular so quickly, that meant that they were having some
pretty massive bandwidth issues and so that that sort of
(13:48):
thing can come into play. And yeah, like I said,
it's it's one of those things where you've got to
figure out, well, we have to make a certain amount
of money just to sustain our businesses. And then in
order to be a successful business, you have to actually
a money. So you have to determine what kind of
ads you use and how much how many of them
you use. So now, back back in those early days
(14:09):
when I was talking about UM, the the days like
when Yahoo was selling ads at around the same rate
as what you would get for a magazine ad. That
was about around sometimes thirty dollars per one thousand clicks
or one thousand um impressions actually, and impressions and clicks
(14:29):
are two different things. Impressions essentially means that if a
thousand people visit that that particular website and that one
ad is on that website, then the average advertiser would
pay the website thirty bucks for every thousand. Well, yeah,
he's just that that is not a standard necessarily a
standard rate he's just using. Yes, that that was back
(14:50):
in the early days, just web thirty, sometimes more than
thirty dollars per one thousand. But as time has gone
on that that price has been seriously cut down. And
it all depends on what kind of website you run too.
If you're running a website that's incredibly popular, then you
can command higher prices than you can than a smaller
website can. But in general you're now talking about a
(15:12):
few cents per one thousand visitors if it's a uh
CPM model, And we'll talk about that in a second.
But before we before we get into the various models,
I wanted to talk about the different formats that you
find in web advertising. Yeah, probably the most popular in
those early days was the banner at the banner adea.
These were the ones that ran along the top of
(15:34):
the ad of the site, sometimes along the bottom, and
if it was along the side, we called them sidebars
as opposed to banner ads, but the same sort of thing.
It's a a long, narrow band that would have an
add on it for for some product or service. Usually
it was a link, so that if you clicked on
the banner, you would go to the website of said
(15:56):
product or service. And uh, it was the way to
advertise on the web for a really long time. UM.
But again, because it's a link, it's one of those
things that can be monitored and in fact, if it's
a link that's coming into a company's website, they may
not even need the advertising. UM. The They may not
(16:17):
need another agency to tell them anything about the traffic,
they might be able to see it on their own.
But if they see that the traffic just hasn't increased significantly,
or that, uh, that traffic from that ad hasn't really
picked up, and that they're not really seeing a conversion
into sales, then that's going to really cut down on like,
why would anyone bother buying an AD if it's not working.
(16:40):
So those were some of the earliest ones, and they're
also some of the ones that are easiest for users
to ignore. In fact, there's you know we talked about
in the business, it's called ad blindness, where you just
you just don't even register it anymore. You're used to
ignoring anything that falls in certain quadrants on a website
because that's where everyone puts their ads, and you just
(17:03):
don't even notice it anymore because you're just looking for
the content. Well, advertisers hate that because it negates the
whole ad and you know, people are spending time and
money to develop these ads, and and again they're not
necessarily being evil. They're trying to reach an audience so
that they can sell their products or services. Some of
those products and services may be amazing, but it doesn't
(17:26):
change the fact that people have gotten really good at
ignoring those ads. So there's other kinds as well. Uh,
there's the floating ads which float across your screen and
you have to Yeah, I'm not a big fan of
them either, but again they are hard. They they're they're
impossible to ignore because they float right in front of
your screen and until you close them or click on them,
there they stay there. And the cousins of the pop
(17:49):
up ad, right, pop up and pop under ads are similar.
Now pop up ads become their own it's their own
window that pops on top of the browser. And those
were popular for a while. In fact, I remember back
when you would hit certain sites like uh like like
there were a few sites that I went to there
were like a movie rumor sites, right because I was
(18:10):
just interested in what was coming up in movies. And
some of them would work with advertising agencies that did
pop up ads, and you would get one pop up
ad and as soon as you go to close that,
two more pop up ads would pop up, and then
you suddenly you've got you know, five or six pop
up beds covering up your the content you were trying
to read and then eventually you just say, why am
(18:30):
I even bothering going to the site? I'm going to
find some other place to go rather than deal with
this frustration. Pop under ads are similar, except that the
new window pops up under your browser, so that until
you close your browser, you may not even be aware
that it's there. Yeah, and some some sites used to
track the length of time that the ad appeared on
the screen. So let's say there's a pop under ad
(18:52):
and it's been up and you don't even know it.
So they're the site is getting to say, hey, you
know so, and so we we actually have a a
great rate of people having this up on their screen
because there are some people here who have it up
for hours and hours. Of course, if they're of course
they can't see it. And of course if if not
that many people are clicking on the ad, then that
that's not as powerful story, right, Like, yeah, they have
(19:15):
it up for hours, but no one actually ever bothers
to click on the ad, then that falls apart. Now,
see that's just in the details. And and one of
the things that has made these ads less common, uh
is the functionality and virtually every browser that I've seen
in the last three or four years that has the
pop up blocker enabled in the preferences so that you
(19:38):
can go in turn it off before you you know,
the first thing you do is you you go into
the preferences and start setting it to the way you
want it to work. And one of the first things
I do is turn off the pop up ad, you know,
and and they just completely prevent it from opening, right.
And then there's some sites that use pop ups for
legitimate well advertising is legitimate, but there's some sites that
(19:58):
use it for purposes that like interact exactly, so like
filling out a form. So in those cases you have
to just you have to disable the pop up blocker,
maybe just for that one site, but yeah, I mean
that that's the things that these pop up ads and
pop under ads are intrusive enough so that users really
don't like them. The floating floating adds in a way
(20:20):
can be too. They're not quite as bad in my opinion, um,
but they also can be irritating if you're just trying
to get to certain content. The floating adds, though, don't
irritate me the way peel or expanding ads do. These
are the ones where if your cursor floats over the ad,
(20:41):
it suddenly takes up half your screen space or more,
it will unroll. And we've we're just gonna be completely
blunt here, all right. So, so the company we work for,
how stuff Works dot com and as part of Discovery Communication,
part Discovery Communications makes revenue through advertising m other things. Yes,
(21:01):
and so we have had these these peel ads, these
expanding ads on our site. Uh and I think, um,
I think I'm safe to say I'm not the only
one who found it frustrating when I would visit my
own site and try to find a particular article only
to have an uh an ad cover up half the page.
While a lot of these things, too were trials to see, uh,
(21:25):
how well the public would get into it. So not
only do you want to find out, hey, are people
looking at these? Are people clicking through to see what's
on the other side of these? And how many people
uh stop coming because what they you know, because when
they say, you know, hey, I don't like these pop
up ads, I don't like these pop up ads. I
don't like these peel ads, they may stop coming to
the site. As Jonathan was pointing out, and if if
(21:48):
the the site that is running advertising notices this as
a trend. They'll say, hey, you know what, this is
working to the point where it's not working. Yeah, yeah,
And people are seeing these and they don't like them
and are leaving. Right. The goal of the advertiser is
to get that ad in front of your your eyes
and to have you act in some way on that
ad in a in a positive way. As far as
(22:08):
the advertiser is concerned. You don't want to turn off
your potential buyers, right, So they're not trying to alienate
the audience. That's not the that's not the goal at all.
In fact, that's completely antithetical to their goals. So that
you know, there are times where you'll see certain ads
kind of fade away from popularity because advertisers have learned
like this has such a negative impact on the user
(22:30):
experience that that there that any benefit of getting that
name out into the world is negated by how they
are are associating that ad with their experience. So some
of these ads you just don't even see that frequently anymore.
There are other kinds as well, their wallpaper ads, where
it will change the background of a website to to
(22:53):
be a certain uh wallpaper, Like I've seen that for
for movies, gaming times to gaming, so it's also I
mean I've even seen it for things like, um like
snack foods where you'll see like along the background, it'll
be snacks instead of whatever the normal background would be.
There their ads that can be inserted into text, so
(23:15):
they you'll see in the content that certain words are highlighted,
and it may be that those words like if you're like,
oh wow, that is kind of cool, and you click
on it and it goes to the uh to a
site that sells something that falls into the category of
whatever the text was, so it's kind of a type
of contextual ad. And also there's the video ads, the
ones that were made famous by Uncast, where you would
(23:38):
go to a site and there'd be a little video
ad running, usually in one of the rails, so like
off to the right or something, and it would have
full video and full sound, which could be very uh,
very jarring if you are like me often listening to
music on your headphones over your computer and you visit
(24:00):
a website and then you suddenly hear someone talking to
you and you're like, someone, what's what's going on? And
you start looking around there there's no one around me.
And uh, most of the ones I've seen recently that
do that leave the sound off until you noticed the
video is playing, and then some people will turn the
video on the sound on, and some people won't. Um.
Something that I just thought of that's sort of unusual.
(24:20):
Um the music station Pandora will do. They'll do advertisement
deals with companies and they'll build a special music station
around the product that they're trying to do. Um. Yeah.
Spotify does the same thing. Yeah yeah, which is kind
of a unique thing because they'll do the wallpaper type
thing too, but they'll also do uh something that other
(24:43):
sites can't, which will have, you know, a special tie
into the type of site. Um that that it works with. Guys,
it's Jonathan from the Future interrupting this classic episode about
web advertising so that we can listen to some advertising
that helps support the We'll be back after this quick break.
(25:09):
Formats that ads can take, and there are other ones
as well. There's more than what we just covered, but
those are the basic ones. There are different approaches. These
ads can take two and you alluded to one of them,
and one of them is being contextual or targeted. Yes,
and when you're talking about a contextual or targeted AD,
you're talking about designing the ad so that it will
(25:30):
like using ads that will appeal to the same audience
space as the ones that are there to consume whatever
content is on that site. So, for example, if I
were to go to how stuff works dot com and
I'm looking at how GPS systems work or GPS works,
would say GPS systems because I would want to go
to my A t M machine and use my PIN number.
(25:51):
But if you went to UH, if you went to
that and then there was an AD about a particular
vendor that sells GPS units, then you'd be more likely
the thought processes, you'd be more likely to click on
that because you're already interested in the topic, as opposed
to going to an article about how GPS units work
(26:11):
and seeing an AD for I don't know, um, a
gelatin dessert. Yeah, those two things don't really connect to
one another, although there's always room for it. There's no
there's no I wasn't using the brand name and then
I go and user slogan, but the the Yeah, that's
the that's an example. You know you wanted the contextual
(26:32):
or targeted ads tend to have a higher degree of engagement,
meaning that more people click on it than ones that
have no connection to whatever the content is for the
site that is in question. So one of the things
that makes web advertising so appealing for advertisers is their
ability to target uh this to their customers, as you
(26:55):
were saying. And they can't do that with other media
because they would need to do a serve. They would
actually have to find out, hey, how how did you
hear about us? With the web, they use cookies, which
are little pieces of text that are downloaded to your
computer and uh written to and they'll go okay. So, uh,
you know, Steve visited how stuff Works dot com and
(27:16):
he also visited uh CNN, and he also visited his
local papers website, and so apparently he likes reading uh
stories about what's going on. He's intellectually curious. Um, so
we're gonna you know, he's interested in animals because we
know he visited the Animals channel and how stuff Works
dot com and read a story about a rescue dog
(27:37):
in his local paper. So we're gonna send him and
add about dog food and maybe he has a dog
or maybe as a cat. We'll try a cat cat
food ad on the next page. And so, if you've
ever looked at a website and seen an ad targeted
to you in your specifical something that you typically buy
or are orientist, or are interested in, and it says, hey, um,
(28:01):
if you're in the Dallas area and looking to buy
something something, you can wait a minute, How in the
world did they know I was in Dallas. Well, they're
using these cookies on your computer to gather information about you. Um.
Some people see it as a major privacy, privacy issue
because it has information about you and they're looking at that.
(28:22):
I would say that, yes, it's a privacy issue, but
in general, they don't really want to know what kind
of underwhere you prefer, and where you live. They don't
even care what your name is. They really just they
just think of you as potential customer. Yeah, and so
this is to convert you from potential customer to actual customer.
And yeah, that's a good, good progression. Because I was
(28:42):
talking about the general ads, the contextual or targeted ads,
and then personalized ads, which is what Chris's time all
right here, where it's personalized based upon your experience. And
there's some companies that do this better than others. Um,
there's some companies that are much better at gathering information
about you. It's ample Facebook. Yes, Facebook doesn't even have
(29:03):
to bother gathering information about you because you give Facebook
the information about you every time you use it. This
is what makes Facebook such a valuable company. People not
only opt in um to their advertising by being there,
they're also providing them all sorts of context for themselves.
You know, I like these bands, I like watching these
(29:23):
movies and reading these books. I've noticed on my Facebook
page when I go there, I noticed that the ads
often seemed to mirror some of the stuff that's been
posted on my in my news feed. So I'm reading
the reading stories or whatever, and I look clients over
at the advertising and like, that's kind of clever that
they actually, you know, that they've taken the context of
(29:46):
what was posted and managed to pull an ad that related,
sometimes extremely tangentially to whatever the content was. It's also
a little creepy, but anyway, that's Those are the three
general role approaches. The general general advertising, where it doesn't
have anything necessarily to do with whatever the content is.
The contextual one, where it does have to relate to
(30:08):
whatever the content the site is and then the personalized one,
which relates more to the actual user than necessarily even
the content. The early days of web advertising UM sort
of looked like it was going the whole concept was
going to be sort of a dud because at first
it looked like, uh, it just didn't reach people in
the way that advertisers were used to. They were used
(30:30):
to the the old style of media. They couldn't figure
out exactly the best approach. They couldn't figure out the
size or the placement on the page that they wanted
to use, and it looked like it was going to
be more of a branding than a direct response target.
And then, you know, once cookies, once they figured out
how to use cookies to their advantage, they were able
to do more targeted and more personalized advertising. And now
(30:52):
it's become uh, you know, a multi multi billion dollar
business and that the you know, this is what has
helped UH companies like Yahoo, Facebook, Google and others to
grow as as much as they have is because they're
able to target advertising so precisely UM, you know, and
(31:13):
use it in different places like Google makes Gmail free
because it's able to advertise alongside UM and and we've
you know, taken advantage of that. But because so many
places offer us free services that are supported by advertising,
so it's it's sort of a trade off that we make, um,
providing this information in exchange for free web services. So
(31:35):
let's talk a little bit about how these ads actually
generate money. And there are various strategies that advertisers use.
One is called CPM, which is a cost per mille
or thousand, yes not a million for my fellow Americans
who would possibly think such a thing, but cost per
(31:57):
thousand impressions, and an impression is a essentially you're looking
at it. Yeah, there's a there's a there's a set
of eyes that are on that that website. Um, so
for every one thousand times someone views that website, uh,
the average advertiser would would give a certain amount of
money to the site itself. And again it's probably on
(32:19):
a the order of a few cents, so let's say
a nickel. So every time, uh, that counter hits one
thousand for that site, the advertiser gives a nickel over
to the site. So you have to get lots and
lots and lots of eyes on that site for it
to actually be worthwhile for the website, you know, so
(32:41):
they get that's the idea is that it gives an
incentive to the website to create really awesome content that's
going to pull lots of people there, and in web terms,
that's called sticky. You want people to go there and
stay there. Yeah. Yeah, if if people just go and
then and then bail, well then once the advertiser starts
looking at the figures, they're gonna say, well, this person
(33:03):
was here so briefly that they probably didn't even see
my ad So there's no point in paying you a
higher amount of money per thousand eyeballs when or pairs
of eyeballs when when people aren't even bothering looking at stuff.
So yeah, it's it's more than just the fact that
a thousand people got there. And sometimes this gets knocked
(33:25):
down to um a CPV, which is a click per visitor,
which again is different than an impression, because an impression
could be that you go to a website, you click
to a different page on the website, you go back
to the home page. Well, your two visits to that
homepage may each count as an impression, even though it's
(33:47):
the same person looking at it. You have seen that
same page twice, so you've seen the same ad twice.
A CPM maybe UH may count both of those visits.
A CPV is to different. That's count. That's clicks per
or sorry, not clicks, but cost per visitor. So the
idea being that every unique visitor counts towards that AD.
(34:09):
But if you were to keep refreshing the page or
click around and keep coming back to that homepage, those
additional visits would not count. It's only the unique visitor
that counts, and usually that's on a per day basis,
so for every twenty four hours. So if you came
back to that page the next day, sure it would
count then, but it doesn't count during your visit when
(34:31):
you're at that page um or that website. I should say,
Chris and I have a bit more to say about
web ads, but before we get into the final segment,
let's take another quick break to thank our sponsor. Then
you've got uh CPC, which is cost per click. Now
(34:54):
this is a little more challenging in that you have
to create really good ads that will get people excited
to click on it, to actually click on an AD,
because for a lot of us that feels like the
last thing in the world you want to do. You know,
you just want to look at the content. You don't
want to click on an ad. But clicking on the ads,
(35:14):
you know, that helps pay for the site. And also
there may very well be stuff that the ads are
are advertising that you're interested interested in. So as uh
cpc UM means that every time someone actually clicks on
the ad, the advert advertiser will give a certain amount
of money to the website. And that money, you know,
(35:37):
it may be every several every thousand clicks in that case,
but it tends to be a much higher rate than
the impressions because now you've gone from people just looking
in an ad to people actually reacting to an ad. Uh.
And then the other big one is c p A,
which is cost per acquisition or cost per action and
(35:57):
this is an affiliate program. This is when a company
offers up an affiliate program where um the they have
an agreement. For example, we we've done this in the past.
Tech stuff has done this because we did and we
did audible ads audible dot com. And the way that
that one but who are as far as I know,
(36:19):
are not are not sponsoring this particular episode. But the
way those those agreements tend to work is that the
vendor works with the site or service. So for example,
we'll stick with audible dot Com. They come to us
and say, we would like to make a partnership with
(36:40):
you if you you need to run an ad in
your podcast. When you run that ad, you tell people
to go to audible dot com and use this particular
UM password or or code when they go, and then
they will get UM. They'll they'll be able to join
for a discounted rate, and every user that does that,
(37:01):
we will we will pay you a certain amount of money.
And it all depends on the advertiser and the service.
I mean, it's all this is all negotiable stuff, right
and frankly, I am not privy to that. I have
no idea what it is because that's not my part
of the business. I create content. So, uh, every time
someone actually goes and signs up for these services using
(37:23):
the ad the promotional code that the website or podcast
whatever gives out, then money goes to that site from
the advertiser, from the vendor. And again this is much
more valuable because now you have people not just clicking
on something but actually enrolling in some sort of product
(37:45):
or service, and so that's considered much more valuable than
a typical impression would be. Now those are your major types.
There are lots of other variations of this, but those
were what I would say are the dominant ones in
online advertising. Okay, and uh, and again all three of these,
(38:06):
none of these are. None of these are on their
own good or bad. It's all on how they are
used and whether or not they are part of the
experience in a way that's not intrusive, or if they
in fact get in your way and irritate you. Yeah, yeah,
and then and that makes tracking all that much more
(38:28):
valuable for the advertiser and for the sites. Um, because
you know, as tastes change as to how the effectiveness
of of web advertising is measured. Um, you know, they've
they've gone from these through these different models, and sometimes
they shift toward one and conventional wisdom says that's the
best way to do it, and they'll change their mind
(38:49):
and shift back. So they track all of that information, um,
just so that they have an idea of who they're
reaching and how so, UM, you know that that's why
they do a lot that. So Chris, you're you're probably
gonna know the answer to this question, but I'm going
to ask it and see if you see in fact,
see if in fact you do know the answer. There
(39:10):
is one company out there on the Internet that is
dominant as far as the web advertising business goes. As in,
this is the company that provides the outlet for web advertising.
It's not itself necessarily an advertiser. Do you know what
that company is? I would have assumed it was a
company that rhymes with Schmoogle. In fact, you are corrected,
(39:33):
is Google, which according to at least some figures, has
about almost seventy of the online advertising market. That's very impressive. Yeah,
you think about that, Think about all the different advertising
companies that could be out there on the web, and
for one to have nearly sevent of the market share,
and you're talking billions of dollars of revenues going through
(39:56):
this this whole industry, that is amazing and scary. You know.
That's that's funny too, because that's the one type of
ad we didn't mention ad sense text text advertising. Well
I did mention it briefly because I thought about the
little bit and you know, but yes, but yeah, they
don't do the you know, the banner ads or or
(40:19):
sidebar ads, or or pop ups or pop unders. It's
all done with text. They'll have sponsored results that kind
of thing, exactly. It's it's just kind of funny that
that much of the ad industry is dominated by something
that doesn't actually use it whiches yeah and we you know, yeah,
so it's I mean, it's it's big business stuff. It's
still even today, despite the fact that the web has
(40:42):
been around for more than two decades now, um, we're
really still trying to find the right balance between the
value of advertising and um and and how it impacts
the user. Because if the value you have advertising keeps
falling as a result of users being alienated by ads,
(41:04):
then web content creators have to find new ways to
make money. And without finding new ways to make money,
we're not going to have nearly as much content on
the web, and so it could turn out to be
a bad thing for users in the long run. Now
that doesn't mean that users should just sit there and
say I love ads and click on everything. But if
(41:26):
there are ads that are effective, then users probably shouldn't
um complain about them too much, because again, the alternative
is that we lose all that content. In the long run,
It's definitely something that you have to be willing to
make the trade off for. Yeah, it's and it is tricky.
I mean I as a consumer, I can tell you
(41:46):
that a bad ad really ruins my mood when I'm
on a on a website, even if I love the website.
If it's a really bad ad, then my first reaction
is I think, you know what, I'll just come back
some other time. The different advertising campaign is running on
this site, and that wraps up this discussion about web ads. Obviously,
(42:06):
things have continued to evolve since two thousand twelve, and
I've talked about web advertising and advertising on the Internet
in general in a few other episodes, So you can
always go through the archive and look at those topics.
If you are interested in learning more. To do that,
head on over to text stuff podcast dot com. That's
(42:27):
our website where we have the archive, plus background information
on me, links to our presence on social networking sites,
and a link to our online store. And every purchase
you make goes to help the show. If you have
any suggestions for future topics I should cover on this show,
you can email me at tech Stuff at how Stuff
(42:48):
works dot com and I'll talk to you again really soon.
Text Stuff is a production of My heart Radios How
stuff Works. For more podcasts from I heart Radio, visit
the i heart Radio app, Apple Podcasts, or wherever you
listen to your favorite shows. H
Welcome to tech Stuff, a production of I Heart Radios
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland, and I'm an executive producer
with How Stuff Works and I heart Radio and I
love all things tech and it's time for a classic
episode of text Stuff. This episode, originally published on June twenty,
(00:29):
two thousand twelve, awful close to my birthday, is called
tech Stuff Clicks on Web Ads, And as the name suggests,
Chris Pallette and I sit down to talk about web
advertising and how web advertising works and the whole revenue
model behind it. So I hope you enjoy this episode.
(00:51):
You like stuff on the web, right? Yeah? I mean,
you know, both of our careers depend heavily, uh. In fact,
I would say entirely upon upon putting stuff up on
the web. And the reason why we're able to do
that is because we can make money by putting stuff
up on the web. Yes. And the reason why we
were able to make money putting stuff up on the
(01:12):
web stems mainly from advertising, yes, And so we wanted
to talk today a little bit about web advertising. We've
covered the subject a little bit in previous episodes, but
we really wanted to kind of dive into it. And
advertising has a bad rap, and part of that is
because advertisers have sometimes used very invasive, intrusive or manipulative
(01:36):
approaches to try and get ads in front of you. Yes,
and I'd like to point out that this episode is
brought to you by Chocolate Nibbles now with nine essential
vitamins and minerals. Yes, we got rid of that other
non essential vitamin and mineral. Yes, just it was looking
at us funny and we didn't like its face. But now, yeah,
we're talking about web advertising and there's good points to
(01:58):
it and bad points to it. Now, the good points
are that without web advertising, you'd have to find some
other way to make money putting content up on the web,
or else people wouldn't do it, or at least not
as many people would do it, and certainly not you
wouldn't see the same level of quality across the web.
There there'd be, you know, occasionally, there'd be someone who
would be amazingly talented, who for altruistic reasons, wants to
(02:23):
share what he or she has come up with on
the web. And those people will be amazing and their
content they create would be phenomenal, and it would all
be done, you know, the effort and the time being
put in would all be that one person's resources, and
that would be fantastic. Chances are it wouldn't be their
day job though, because they wouldn't be since you weren't
(02:45):
making money off of it. They've got to eat somehow,
so they would probably be doing something else for forty
hours a week. And then you think about all the
sites you regularly go to, a lot of those sites
are supported through advertising, and so without the ads, those
sitestone exists, which means that content that we have grown
so fond of accessing would no longer be there. So
(03:06):
in that case, advertising plays a very important role. Now,
of course, you can you can make money with online
through other ways besides advertising. You could have a subscription
based service where people have to pay a certain amount
per unit of time, usually be monthly, but it might
be you know, six months or a year or whatever.
You can't even do it smaller units if you really
(03:27):
wanted to um and make money that way by saying,
all right, well, you can access the content we create
on this site if you pay this amount of money
per this unit of time or or per article some, Um,
some sites do that, you know where you have Hey,
if you want to read this article, then it will
be to to read this one particular story, right. And
(03:51):
the thing is that the way the web has developed
over time, people have grown to expect free access us
to something if it's on the web. Yeah, it's a
cultural thing. Yeah. The early days of the Internet, I
mean that the people who were doing this were government
institutions in the United States and higher learning you know,
(04:11):
colleges and university so the the content online was specifically
for those groups and the commercial entities really weren't involved
in it in the early days. So the people who
were doing that or or actually you know, some of
it is from the online services UM. So if you
had a modem, you could dial up to a bulletin
board and you may not have to pay a fee,
(04:33):
and you would join the community there and swap stories
or you know whatever it is that they talked about. UM.
But they didn't they might pay a fee, a subscription
fee to join the BBS or for internet access in
the early days of the Internet as a commercial sense, UM,
but they wouldn't be paying for the content. And so
(04:55):
the idea came about that web advertising could potentially be
far more effective than traditional forms of advertising. That was
the initial thought, and the reason for that was that
if you buy an ad in a magazine, or you
put on a billboard, or you put in a television show,
it's a in the ad breaks you have a reasonable
(05:18):
expectation of a certain number of people that ad is
going to, UH is going to connect with. Now, whether
those people are paying attention to the ad, you don't
know whether if whether or not they pay attention to
the ad and then go forward and actually act based
upon what they saw in the ad. You don't know
that either, but you you what you do know is
that a certain number of people, based upon the market research,
(05:41):
are going to see that particular ad. Actually, this seems
like a good time to bring up a point that
there are two major types of advertising we're talking about
here too. Um. Direct response is the type of advertising
debt does encourage you to do something like if you
were going to UH listen to the podcast and suddenly
now you're craving a bowl of chocolate nibbles and let
(06:03):
me tell you they are delicious. Um, now we got
rid of the non essential vitamin mineral. Yes, you should
run out and buy something. That's the point of an
advertisement like that. UM. Then you have what they call branding,
which is basically, you know, hey, you don't have to
go run out and buy our product. Just think of
us the next time you're doing something like that. And
(06:25):
that's the kind of thing that you see like at
um uh sporting events. UH. For example, the ads on
the sides of hockey boards or on on the sides
of race cars. They don't say by you know, such
and such product. They're just showing you the brand name,
so that you sort of think about them and you're
you're thinking, oh, well, you know, I like these guys.
They sponsor my favorite driver. Yeah. The idea might be
(06:48):
to get that brand name in your mind so that
the next time you go out to get something, you
actually think about that particular brand. For example, you might think, hey,
I'm thirsty, I would like a soda. I just saw
that ad for coke, and maybe I wouldn't normally get
a coke, but that sounds good to me right now,
I'll go ahead and get a coke. UM. So it's
it's one of those things where getting the brand out
(07:10):
there is really important, and marketers will tell you how
important that is that you know, you don't want to
mess with your brand, You don't want to change your
brand identity to drastically unless you do it in the
right way so that you make it a sort of
a public event where people will make that transition with you,
because it's you know, this is stuff that's sticky in
people's minds. Yeah, there are people who are going to
(07:32):
walk into the store and they're going to see that
brand name that they know so well, um, and they're
going to choose a product from that manufacturer simply because
they know the name. They might see it next to
something else that they've never heard of and go, well,
at least I know who these people are. So that's
just basic advertising. Now, if you're talking about the web,
the the the advantage, or at least the apparent advantage
(07:55):
back in the early days, was that you could actually
monitor what people were doing based upon the webs you were,
the the ads you were serving up on the web. Brother,
So let's say that you go and you put an
ad on a really heavily traffic site in the early
days of the Internet, so Yahoo. Let's say, um, you
put an ad up on Yahoo. Well, you already know
that a certain number of users and the millions perhaps
(08:19):
visits Yahoo each day, so you know that that that's
how many people are going to see your ad, and
and the websites track their statistics so that they can
report back to advertisers. Hey, if you advertise with us,
you will reach at least two million people. Right, this
is how many This is how many unique visitors you
will see. Yes, this is how many people actually have
(08:39):
page views. Because the two things are different. Yes, we
talk about that in a minute. Yeah, so at any rate,
because the early days of the web advertising, they were thinking,
why is this any different from say a magazine Apart
from the fact that we can actually give you more
data about the people who are taking a look at
this ad, um, it should be the same price, and
(09:00):
in the beginning it was. But here's the Here a
couple of problems. One is that it also let you
know when people were not uh reacting to an ad,
at least not actively reacting to an ad. So, in
other words, if no one's clicking on the ad, or
if it's a really really really small number of people
(09:21):
who are clicking on the ad, then you question was
the value of that ad right, Because if no one's
going converting over and clicking through, then the advertisers say, well,
why are we spending the same amount of money we
would for a magazine ad or a television ad if
this if only these few people are clicking through. Never
(09:41):
mind the fact that we can't be sure how many
people see the magazine add or television ad and react
to it, that doesn't matter. They're saying, well, we have
a proof here that not that many people are clicking through,
so therefore this is overvalued. That was one problem. The
other problem was that lots of websites were popping up.
That meant there was a lot of landscape for advertising.
(10:04):
So with lots and lots of websites of various degrees
of popularity popping up on the web, that devalued web advertising.
It's like a supply and demand thing. So, for example,
imagine that you have a stretch of highway and there
are three billboard signs up, and they're only three, and
(10:25):
those three are would be a certain value to be
able to advertise on them, because that that's the only
three that any drivers are going to see. Well, then
let's say fifteen new billboards pop up along that same
stretch of highway. Well, that's just devalued the the value
of the three that already existed there. Yea. And that
can actually happen on a site too. It's not just
(10:46):
across the the web. If you put up so many
ads that uh, it sort of drowns out the content.
People begin to tune them out, and your your message
loses its power. So it's a very delicate balancing act
is figuring out where the place ads, what sort of
ads you use, how many do you have per page?
And it's not just a balancing act of turning off
(11:09):
readers or turning off visitors from going to your site.
It's also a question of how much money does it
cost to run your business and how can you offset
that through advertising? If that's your chief way of generating revenue.
You have to find that balance. And it's tricky because
you know, you, if you're talking about the ads themselves
are being devalued the more they're out there. Then you
(11:32):
have to balance that out, like how do you take
advantage of advertising in such a way that you're actually
making enough money to sustain whatever your business you're in, right,
and uh, and it's not easy to do well. And
it it's worth pointing out I think too that um,
to some degree, the web is a fairly inexpensive place
to do business. Buying a domain name, arranging hosting for
(11:56):
a year, um, you know, that's that's not terribly expensive.
You start getting into, uh, some cost problems when you
generate a lot of traffic to the site, because in
a lot of cases, say, if you you're just a
person who wants to start a blog just for the
sake of starting a blog, and you promote it to
your friends on Facebook, and you get a couple of
(12:18):
gigabytes worth of bandwidth per month, that's probably not going
to and that's a lot of traffic just you know,
for for a person with a blog who's just having
fun with it. Um, you know, you might decide to
stick some ads up there. But and and that may
very well offset the cost because you're web hosting provider.
A lot of them these days don't charge uh for
a certain amount of traffic. Now, if you're somebody like
(12:42):
a magazine or streaming media side or something like that,
that's going to generate tons and tons of traffic, and
the web hosting provider is gonna say, hey, look, pal,
you know, if you're taking up room on our servers,
you want yeah, if you want the band with, you
gotta pay. Yeah, So know, you have to pay people
to run the side and maintain the side. If you're
(13:04):
a magazine, you want to pay writers, maybe freelancers, editors.
You know, you're gonna have a lot of people working there,
so you have to pay for them too, and then
you have to generate more revenue to offset that. So
it's it's relatively inexpensive to get in, but depending on
the scale of the operation, you might need serious money
to keep it going right. And you know, we when
(13:24):
we talked with Bernie Burns of Rooster Teeth, Yeah, you
know he talked about back in the early days of
Rooster Teeth, that was before streaming video was a thing
on the web. So what people would do is they
would actually download an episode of Red Versus Blue, Right,
So they're downloading video files. And because it became so
popular so quickly, that meant that they were having some
pretty massive bandwidth issues and so that that sort of
(13:48):
thing can come into play. And yeah, like I said,
it's it's one of those things where you've got to
figure out, well, we have to make a certain amount
of money just to sustain our businesses. And then in
order to be a successful business, you have to actually
a money. So you have to determine what kind of
ads you use and how much how many of them
you use. So now, back back in those early days
(14:09):
when I was talking about UM, the the days like
when Yahoo was selling ads at around the same rate
as what you would get for a magazine ad. That
was about around sometimes thirty dollars per one thousand clicks
or one thousand um impressions actually, and impressions and clicks
(14:29):
are two different things. Impressions essentially means that if a
thousand people visit that that particular website and that one
ad is on that website, then the average advertiser would
pay the website thirty bucks for every thousand. Well, yeah,
he's just that that is not a standard necessarily a
standard rate he's just using. Yes, that that was back
(14:50):
in the early days, just web thirty, sometimes more than
thirty dollars per one thousand. But as time has gone
on that that price has been seriously cut down. And
it all depends on what kind of website you run too.
If you're running a website that's incredibly popular, then you
can command higher prices than you can than a smaller
website can. But in general you're now talking about a
(15:12):
few cents per one thousand visitors if it's a uh
CPM model, And we'll talk about that in a second.
But before we before we get into the various models,
I wanted to talk about the different formats that you
find in web advertising. Yeah, probably the most popular in
those early days was the banner at the banner adea.
These were the ones that ran along the top of
(15:34):
the ad of the site, sometimes along the bottom, and
if it was along the side, we called them sidebars
as opposed to banner ads, but the same sort of thing.
It's a a long, narrow band that would have an
add on it for for some product or service. Usually
it was a link, so that if you clicked on
the banner, you would go to the website of said
(15:56):
product or service. And uh, it was the way to
advertise on the web for a really long time. UM.
But again, because it's a link, it's one of those
things that can be monitored and in fact, if it's
a link that's coming into a company's website, they may
not even need the advertising. UM. The They may not
(16:17):
need another agency to tell them anything about the traffic,
they might be able to see it on their own.
But if they see that the traffic just hasn't increased significantly,
or that, uh, that traffic from that ad hasn't really
picked up, and that they're not really seeing a conversion
into sales, then that's going to really cut down on like,
why would anyone bother buying an AD if it's not working.
(16:40):
So those were some of the earliest ones, and they're
also some of the ones that are easiest for users
to ignore. In fact, there's you know we talked about
in the business, it's called ad blindness, where you just
you just don't even register it anymore. You're used to
ignoring anything that falls in certain quadrants on a website
because that's where everyone puts their ads, and you just
(17:03):
don't even notice it anymore because you're just looking for
the content. Well, advertisers hate that because it negates the
whole ad and you know, people are spending time and
money to develop these ads, and and again they're not
necessarily being evil. They're trying to reach an audience so
that they can sell their products or services. Some of
those products and services may be amazing, but it doesn't
(17:26):
change the fact that people have gotten really good at
ignoring those ads. So there's other kinds as well. Uh,
there's the floating ads which float across your screen and
you have to Yeah, I'm not a big fan of
them either, but again they are hard. They they're they're
impossible to ignore because they float right in front of
your screen and until you close them or click on them,
there they stay there. And the cousins of the pop
(17:49):
up ad, right, pop up and pop under ads are similar.
Now pop up ads become their own it's their own
window that pops on top of the browser. And those
were popular for a while. In fact, I remember back
when you would hit certain sites like uh like like
there were a few sites that I went to there
were like a movie rumor sites, right because I was
(18:10):
just interested in what was coming up in movies. And
some of them would work with advertising agencies that did
pop up ads, and you would get one pop up
ad and as soon as you go to close that,
two more pop up ads would pop up, and then
you suddenly you've got you know, five or six pop
up beds covering up your the content you were trying
to read and then eventually you just say, why am
(18:30):
I even bothering going to the site? I'm going to
find some other place to go rather than deal with
this frustration. Pop under ads are similar, except that the
new window pops up under your browser, so that until
you close your browser, you may not even be aware
that it's there. Yeah, and some some sites used to
track the length of time that the ad appeared on
the screen. So let's say there's a pop under ad
(18:52):
and it's been up and you don't even know it.
So they're the site is getting to say, hey, you
know so, and so we we actually have a a
great rate of people having this up on their screen
because there are some people here who have it up
for hours and hours. Of course, if they're of course
they can't see it. And of course if if not
that many people are clicking on the ad, then that
that's not as powerful story, right, Like, yeah, they have
(19:15):
it up for hours, but no one actually ever bothers
to click on the ad, then that falls apart. Now,
see that's just in the details. And and one of
the things that has made these ads less common, uh
is the functionality and virtually every browser that I've seen
in the last three or four years that has the
pop up blocker enabled in the preferences so that you
(19:38):
can go in turn it off before you you know,
the first thing you do is you you go into
the preferences and start setting it to the way you
want it to work. And one of the first things
I do is turn off the pop up ad, you know,
and and they just completely prevent it from opening, right.
And then there's some sites that use pop ups for
legitimate well advertising is legitimate, but there's some sites that
(19:58):
use it for purposes that like interact exactly, so like
filling out a form. So in those cases you have
to just you have to disable the pop up blocker,
maybe just for that one site, but yeah, I mean
that that's the things that these pop up ads and
pop under ads are intrusive enough so that users really
don't like them. The floating floating adds in a way
(20:20):
can be too. They're not quite as bad in my opinion, um,
but they also can be irritating if you're just trying
to get to certain content. The floating adds, though, don't
irritate me the way peel or expanding ads do. These
are the ones where if your cursor floats over the ad,
(20:41):
it suddenly takes up half your screen space or more,
it will unroll. And we've we're just gonna be completely
blunt here, all right. So, so the company we work for,
how stuff Works dot com and as part of Discovery Communication,
part Discovery Communications makes revenue through advertising m other things. Yes,
(21:01):
and so we have had these these peel ads, these
expanding ads on our site. Uh and I think, um,
I think I'm safe to say I'm not the only
one who found it frustrating when I would visit my
own site and try to find a particular article only
to have an uh an ad cover up half the page.
While a lot of these things, too were trials to see, uh,
(21:25):
how well the public would get into it. So not
only do you want to find out, hey, are people
looking at these? Are people clicking through to see what's
on the other side of these? And how many people
uh stop coming because what they you know, because when
they say, you know, hey, I don't like these pop
up ads, I don't like these pop up ads. I
don't like these peel ads, they may stop coming to
the site. As Jonathan was pointing out, and if if
(21:48):
the the site that is running advertising notices this as
a trend. They'll say, hey, you know what, this is
working to the point where it's not working. Yeah, yeah,
And people are seeing these and they don't like them
and are leaving. Right. The goal of the advertiser is
to get that ad in front of your your eyes
and to have you act in some way on that
ad in a in a positive way. As far as
(22:08):
the advertiser is concerned. You don't want to turn off
your potential buyers, right, So they're not trying to alienate
the audience. That's not the that's not the goal at all.
In fact, that's completely antithetical to their goals. So that
you know, there are times where you'll see certain ads
kind of fade away from popularity because advertisers have learned
like this has such a negative impact on the user
(22:30):
experience that that there that any benefit of getting that
name out into the world is negated by how they
are are associating that ad with their experience. So some
of these ads you just don't even see that frequently anymore.
There are other kinds as well, their wallpaper ads, where
it will change the background of a website to to
(22:53):
be a certain uh wallpaper, Like I've seen that for
for movies, gaming times to gaming, so it's also I
mean I've even seen it for things like, um like
snack foods where you'll see like along the background, it'll
be snacks instead of whatever the normal background would be.
There their ads that can be inserted into text, so
(23:15):
they you'll see in the content that certain words are highlighted,
and it may be that those words like if you're like,
oh wow, that is kind of cool, and you click
on it and it goes to the uh to a
site that sells something that falls into the category of
whatever the text was, so it's kind of a type
of contextual ad. And also there's the video ads, the
ones that were made famous by Uncast, where you would
(23:38):
go to a site and there'd be a little video
ad running, usually in one of the rails, so like
off to the right or something, and it would have
full video and full sound, which could be very uh,
very jarring if you are like me often listening to
music on your headphones over your computer and you visit
(24:00):
a website and then you suddenly hear someone talking to
you and you're like, someone, what's what's going on? And
you start looking around there there's no one around me.
And uh, most of the ones I've seen recently that
do that leave the sound off until you noticed the
video is playing, and then some people will turn the
video on the sound on, and some people won't. Um.
Something that I just thought of that's sort of unusual.
(24:20):
Um the music station Pandora will do. They'll do advertisement
deals with companies and they'll build a special music station
around the product that they're trying to do. Um. Yeah.
Spotify does the same thing. Yeah yeah, which is kind
of a unique thing because they'll do the wallpaper type
thing too, but they'll also do uh something that other
(24:43):
sites can't, which will have, you know, a special tie
into the type of site. Um that that it works with. Guys,
it's Jonathan from the Future interrupting this classic episode about
web advertising so that we can listen to some advertising
that helps support the We'll be back after this quick break.
(25:09):
Formats that ads can take, and there are other ones
as well. There's more than what we just covered, but
those are the basic ones. There are different approaches. These
ads can take two and you alluded to one of them,
and one of them is being contextual or targeted. Yes,
and when you're talking about a contextual or targeted AD,
you're talking about designing the ad so that it will
(25:30):
like using ads that will appeal to the same audience
space as the ones that are there to consume whatever
content is on that site. So, for example, if I
were to go to how stuff works dot com and
I'm looking at how GPS systems work or GPS works,
would say GPS systems because I would want to go
to my A t M machine and use my PIN number.
(25:51):
But if you went to UH, if you went to
that and then there was an AD about a particular
vendor that sells GPS units, then you'd be more likely
the thought processes, you'd be more likely to click on
that because you're already interested in the topic, as opposed
to going to an article about how GPS units work
(26:11):
and seeing an AD for I don't know, um, a
gelatin dessert. Yeah, those two things don't really connect to
one another, although there's always room for it. There's no
there's no I wasn't using the brand name and then
I go and user slogan, but the the Yeah, that's
the that's an example. You know you wanted the contextual
(26:32):
or targeted ads tend to have a higher degree of engagement,
meaning that more people click on it than ones that
have no connection to whatever the content is for the
site that is in question. So one of the things
that makes web advertising so appealing for advertisers is their
ability to target uh this to their customers, as you
(26:55):
were saying. And they can't do that with other media
because they would need to do a serve. They would
actually have to find out, hey, how how did you
hear about us? With the web, they use cookies, which
are little pieces of text that are downloaded to your
computer and uh written to and they'll go okay. So, uh,
you know, Steve visited how stuff Works dot com and
(27:16):
he also visited uh CNN, and he also visited his
local papers website, and so apparently he likes reading uh
stories about what's going on. He's intellectually curious. Um, so
we're gonna you know, he's interested in animals because we
know he visited the Animals channel and how stuff Works
dot com and read a story about a rescue dog
(27:37):
in his local paper. So we're gonna send him and
add about dog food and maybe he has a dog
or maybe as a cat. We'll try a cat cat
food ad on the next page. And so, if you've
ever looked at a website and seen an ad targeted
to you in your specifical something that you typically buy
or are orientist, or are interested in, and it says, hey, um,
(28:01):
if you're in the Dallas area and looking to buy
something something, you can wait a minute, How in the
world did they know I was in Dallas. Well, they're
using these cookies on your computer to gather information about you. Um.
Some people see it as a major privacy, privacy issue
because it has information about you and they're looking at that.
(28:22):
I would say that, yes, it's a privacy issue, but
in general, they don't really want to know what kind
of underwhere you prefer, and where you live. They don't
even care what your name is. They really just they
just think of you as potential customer. Yeah, and so
this is to convert you from potential customer to actual customer.
And yeah, that's a good, good progression. Because I was
(28:42):
talking about the general ads, the contextual or targeted ads,
and then personalized ads, which is what Chris's time all
right here, where it's personalized based upon your experience. And
there's some companies that do this better than others. Um,
there's some companies that are much better at gathering information
about you. It's ample Facebook. Yes, Facebook doesn't even have
(29:03):
to bother gathering information about you because you give Facebook
the information about you every time you use it. This
is what makes Facebook such a valuable company. People not
only opt in um to their advertising by being there,
they're also providing them all sorts of context for themselves.
You know, I like these bands, I like watching these
(29:23):
movies and reading these books. I've noticed on my Facebook
page when I go there, I noticed that the ads
often seemed to mirror some of the stuff that's been
posted on my in my news feed. So I'm reading
the reading stories or whatever, and I look clients over
at the advertising and like, that's kind of clever that
they actually, you know, that they've taken the context of
(29:46):
what was posted and managed to pull an ad that related,
sometimes extremely tangentially to whatever the content was. It's also
a little creepy, but anyway, that's Those are the three
general role approaches. The general general advertising, where it doesn't
have anything necessarily to do with whatever the content is.
The contextual one, where it does have to relate to
(30:08):
whatever the content the site is and then the personalized one,
which relates more to the actual user than necessarily even
the content. The early days of web advertising UM sort
of looked like it was going the whole concept was
going to be sort of a dud because at first
it looked like, uh, it just didn't reach people in
the way that advertisers were used to. They were used
(30:30):
to the the old style of media. They couldn't figure
out exactly the best approach. They couldn't figure out the
size or the placement on the page that they wanted
to use, and it looked like it was going to
be more of a branding than a direct response target.
And then, you know, once cookies, once they figured out
how to use cookies to their advantage, they were able
to do more targeted and more personalized advertising. And now
(30:52):
it's become uh, you know, a multi multi billion dollar
business and that the you know, this is what has
helped UH companies like Yahoo, Facebook, Google and others to
grow as as much as they have is because they're
able to target advertising so precisely UM, you know, and
(31:13):
use it in different places like Google makes Gmail free
because it's able to advertise alongside UM and and we've
you know, taken advantage of that. But because so many
places offer us free services that are supported by advertising,
so it's it's sort of a trade off that we make, um,
providing this information in exchange for free web services. So
(31:35):
let's talk a little bit about how these ads actually
generate money. And there are various strategies that advertisers use.
One is called CPM, which is a cost per mille
or thousand, yes not a million for my fellow Americans
who would possibly think such a thing, but cost per
(31:57):
thousand impressions, and an impression is a essentially you're looking
at it. Yeah, there's a there's a there's a set
of eyes that are on that that website. Um, so
for every one thousand times someone views that website, uh,
the average advertiser would would give a certain amount of
money to the site itself. And again it's probably on
(32:19):
a the order of a few cents, so let's say
a nickel. So every time, uh, that counter hits one
thousand for that site, the advertiser gives a nickel over
to the site. So you have to get lots and
lots and lots of eyes on that site for it
to actually be worthwhile for the website, you know, so
(32:41):
they get that's the idea is that it gives an
incentive to the website to create really awesome content that's
going to pull lots of people there, and in web terms,
that's called sticky. You want people to go there and
stay there. Yeah. Yeah, if if people just go and
then and then bail, well then once the advertiser starts
looking at the figures, they're gonna say, well, this person
(33:03):
was here so briefly that they probably didn't even see
my ad So there's no point in paying you a
higher amount of money per thousand eyeballs when or pairs
of eyeballs when when people aren't even bothering looking at stuff.
So yeah, it's it's more than just the fact that
a thousand people got there. And sometimes this gets knocked
(33:25):
down to um a CPV, which is a click per visitor,
which again is different than an impression, because an impression
could be that you go to a website, you click
to a different page on the website, you go back
to the home page. Well, your two visits to that
homepage may each count as an impression, even though it's
(33:47):
the same person looking at it. You have seen that
same page twice, so you've seen the same ad twice.
A CPM maybe UH may count both of those visits.
A CPV is to different. That's count. That's clicks per
or sorry, not clicks, but cost per visitor. So the
idea being that every unique visitor counts towards that AD.
(34:09):
But if you were to keep refreshing the page or
click around and keep coming back to that homepage, those
additional visits would not count. It's only the unique visitor
that counts, and usually that's on a per day basis,
so for every twenty four hours. So if you came
back to that page the next day, sure it would
count then, but it doesn't count during your visit when
(34:31):
you're at that page um or that website. I should say,
Chris and I have a bit more to say about
web ads, but before we get into the final segment,
let's take another quick break to thank our sponsor. Then
you've got uh CPC, which is cost per click. Now
(34:54):
this is a little more challenging in that you have
to create really good ads that will get people excited
to click on it, to actually click on an AD,
because for a lot of us that feels like the
last thing in the world you want to do. You know,
you just want to look at the content. You don't
want to click on an ad. But clicking on the ads,
(35:14):
you know, that helps pay for the site. And also
there may very well be stuff that the ads are
are advertising that you're interested interested in. So as uh
cpc UM means that every time someone actually clicks on
the ad, the advert advertiser will give a certain amount
of money to the website. And that money, you know,
(35:37):
it may be every several every thousand clicks in that case,
but it tends to be a much higher rate than
the impressions because now you've gone from people just looking
in an ad to people actually reacting to an ad. Uh.
And then the other big one is c p A,
which is cost per acquisition or cost per action and
(35:57):
this is an affiliate program. This is when a company
offers up an affiliate program where um the they have
an agreement. For example, we we've done this in the past.
Tech stuff has done this because we did and we
did audible ads audible dot com. And the way that
that one but who are as far as I know,
(36:19):
are not are not sponsoring this particular episode. But the
way those those agreements tend to work is that the
vendor works with the site or service. So for example,
we'll stick with audible dot Com. They come to us
and say, we would like to make a partnership with
(36:40):
you if you you need to run an ad in
your podcast. When you run that ad, you tell people
to go to audible dot com and use this particular
UM password or or code when they go, and then
they will get UM. They'll they'll be able to join
for a discounted rate, and every user that does that,
(37:01):
we will we will pay you a certain amount of money.
And it all depends on the advertiser and the service.
I mean, it's all this is all negotiable stuff, right
and frankly, I am not privy to that. I have
no idea what it is because that's not my part
of the business. I create content. So, uh, every time
someone actually goes and signs up for these services using
(37:23):
the ad the promotional code that the website or podcast
whatever gives out, then money goes to that site from
the advertiser, from the vendor. And again this is much
more valuable because now you have people not just clicking
on something but actually enrolling in some sort of product
(37:45):
or service, and so that's considered much more valuable than
a typical impression would be. Now those are your major types.
There are lots of other variations of this, but those
were what I would say are the dominant ones in
online advertising. Okay, and uh, and again all three of these,
(38:06):
none of these are. None of these are on their
own good or bad. It's all on how they are
used and whether or not they are part of the
experience in a way that's not intrusive, or if they
in fact get in your way and irritate you. Yeah, yeah,
and then and that makes tracking all that much more
(38:28):
valuable for the advertiser and for the sites. Um, because
you know, as tastes change as to how the effectiveness
of of web advertising is measured. Um, you know, they've
they've gone from these through these different models, and sometimes
they shift toward one and conventional wisdom says that's the
best way to do it, and they'll change their mind
(38:49):
and shift back. So they track all of that information, um,
just so that they have an idea of who they're
reaching and how so, UM, you know that that's why
they do a lot that. So Chris, you're you're probably
gonna know the answer to this question, but I'm going
to ask it and see if you see in fact,
see if in fact you do know the answer. There
(39:10):
is one company out there on the Internet that is
dominant as far as the web advertising business goes. As in,
this is the company that provides the outlet for web advertising.
It's not itself necessarily an advertiser. Do you know what
that company is? I would have assumed it was a
company that rhymes with Schmoogle. In fact, you are corrected,
(39:33):
is Google, which according to at least some figures, has
about almost seventy of the online advertising market. That's very impressive. Yeah,
you think about that, Think about all the different advertising
companies that could be out there on the web, and
for one to have nearly sevent of the market share,
and you're talking billions of dollars of revenues going through
(39:56):
this this whole industry, that is amazing and scary. You know.
That's that's funny too, because that's the one type of
ad we didn't mention ad sense text text advertising. Well
I did mention it briefly because I thought about the
little bit and you know, but yes, but yeah, they
don't do the you know, the banner ads or or
(40:19):
sidebar ads, or or pop ups or pop unders. It's
all done with text. They'll have sponsored results that kind
of thing, exactly. It's it's just kind of funny that
that much of the ad industry is dominated by something
that doesn't actually use it whiches yeah and we you know, yeah,
so it's I mean, it's it's big business stuff. It's
still even today, despite the fact that the web has
(40:42):
been around for more than two decades now, um, we're
really still trying to find the right balance between the
value of advertising and um and and how it impacts
the user. Because if the value you have advertising keeps
falling as a result of users being alienated by ads,
(41:04):
then web content creators have to find new ways to
make money. And without finding new ways to make money,
we're not going to have nearly as much content on
the web, and so it could turn out to be
a bad thing for users in the long run. Now
that doesn't mean that users should just sit there and
say I love ads and click on everything. But if
(41:26):
there are ads that are effective, then users probably shouldn't
um complain about them too much, because again, the alternative
is that we lose all that content. In the long run,
It's definitely something that you have to be willing to
make the trade off for. Yeah, it's and it is tricky.
I mean I as a consumer, I can tell you
(41:46):
that a bad ad really ruins my mood when I'm
on a on a website, even if I love the website.
If it's a really bad ad, then my first reaction
is I think, you know what, I'll just come back
some other time. The different advertising campaign is running on
this site, and that wraps up this discussion about web ads. Obviously,
(42:06):
things have continued to evolve since two thousand twelve, and
I've talked about web advertising and advertising on the Internet
in general in a few other episodes, So you can
always go through the archive and look at those topics.
If you are interested in learning more. To do that,
head on over to text stuff podcast dot com. That's
(42:27):
our website where we have the archive, plus background information
on me, links to our presence on social networking sites,
and a link to our online store. And every purchase
you make goes to help the show. If you have
any suggestions for future topics I should cover on this show,
you can email me at tech Stuff at how Stuff
(42:48):
works dot com and I'll talk to you again really soon.
Text Stuff is a production of My heart Radios How
stuff Works. For more podcasts from I heart Radio, visit
the i heart Radio app, Apple Podcasts, or wherever you
listen to your favorite shows. H
TechStuff News
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