Contextual Advertising Takes A Huge Leap Forward

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Google recently announced an upcoming change to the Adwords program, which will allow advertisers to target contextual advertising on specific web sites.

Andrew Goodman reported in WebProNews that this means the end of the old PPC keyword bidding model in favor of pricing based on impressions (CPM), but this isn’t quite right. According to Google, the CPM bidding will apply only to the new “site targeted” advertising feature, and CPM advertisers will still have to compete against keyword-targeted PPC bids for placement on sites carrying Adsense.

Google’s ingenious model for selecting ads to display (maximizing revenue per impression) allows them to perform the ‘apples to oranges’ comparison with ease, and allow advertisers to bid on the same inventory in whichever terms they find more comfortable.

For example, let’s say we have an ad with a PPC bid at $1.00 per click, with a 1% click through rate. That translates to 10 clicks per 1000 displays, or a CPM of $10. A CPM bid of $10.01 will outrank that PPC bid. Simple, elegant, and a big improvement for old-school advertisers.

The biggest improvement, though, is that advertisers will be able to run separate site-targeted campaigns. This is important because it will allow advertisers to use different headlines and copy for their contextual ads. Since contextual ads are shown to people who are looking at something, it takes a different type of ad to get the best response. By comparison, search-targeted ads are shown to people who are looking for something.

Who should be worried about this? Oh, maybe every other online ad network. Who else should be happy, besides advertisers? Publishers with quality sites who can expect their Adsense revenue to grow.

For my own business, I expect that we will shift more advertising funds to Google now that we have a better way to target our contextual advertising. Thanks, Google!

Dan ThiesDan Thies
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