The long tail of advertising
“The long tail” is being talked about in a number of contexts these days – music, books and advertising being most popular. Very simply put, the theory reverses the logic of ABC analysis and Pareto’s 80-20 rule (For businesses, this meant that 80% of your revenues come from 20% of your customers). The earlier theories proposed optimization by focusing on few entities (products/ channels/ customers) to bring in higher value. The theory of long tail reverses the logic by saying “hits” (entities that bring higher value) constitute only a fraction of total value and significant value lies in entities of higher value.
This is the concept that has revolutionized the way Web 2.0 is evolving and the way internet companies generate revenues. So, here I talk about the long tail concept in relation to internet advertising. Since
internet has emerged as a new marketplace, cost of distribution has hit rock-bottom. It has become feasible to cater to a number of smaller entities. In advertising context, these entities are advertisers and WebPages (publishers). There are a few advertisers with huge budgets and infinite number of those with smaller budgets. Traditional media like TV, radio, newspaper are costly vehicles for advertising. Internet, on the other hand, provides infinite ad space with only marginal cost to webpage owners. Hence it has become a very attractive destination for these small time advertisersLet us see how Google acts as a mediator to get the maximum out of the long tail to understand the concept. Google provides a platform for contextual advertising. It means that Google searches the webpage on which an Ad is displayed, picks up the key words and serves an Ad relevant to the content of the webpage.
Say e.g., OnlineCat is an online CAT portal that wants to advertise on the internet. It subscribes to Google Adwords like ‘CAT’, ‘MBA preparation’, ‘online MBA’ etc. So when these words are found on a website (like Catfundae blog), Google will put in the Ad for the company. When there are many companies competing for the same Adwords, the one paying more will get his Ads displayed. So more competition means higher price. When user click the Ad on the website, Google charges the company and also pays a part of it to the person owning the website.
With Google Adwords, an advertiser can spend anywhere starting from Rs.800 per month and still reach a sufficiently large audience.
In short, Google acts as a mediator between millions of websites and thousands of advertisers. Webpages are like newspapers publishing Ads. More the reach, more the revenue.
Note that unlike newspapers, on a webpage, you can measure the interest shown by users through clicks. More popular websites get higher revenue Ads and hence get paid more for each click on the advertisement (Like TimesofIndia charges more for an Ad than Deccan Herald)
But things are not hunky dory for all the websites. What people fail to understand in this is, that with 7 million web pages being created per day, the supply-demand scenario is such that advertisers have an upper hand. It is possible to get a page to advertise your product; no matter how low the budget is (even zero budget charity ads find takers).
So if you think you just have to put ad-sense on your page and rest is easy, think again.
Suggested readings:
http://www.wired.com/wired/archive/12.10/tail_pr.html
http://longtail.typepad.com/the_long_tail/
http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticle&art_aid=45390
http://www.wired.com/wired/archive/14.07/longtail.html
Labels: Interesting Articles
Gyan-ee 3:49 AM
