The Evolution of Monetization of Traffic

It is always amazing to think back to the days before Google Adsense. Before you could just signup and start making money with traffic, you had to either sell a product directly or find advertisers and hope you could sign a deal.

With Adsense and a few clicks you have a entire platform for serving different ad sizes you can customize to fit on your site. Google changed the ad serving space dramatically both for the good and bad of innovation. With the latest panda updates Google is trying to fix a lot of the issues adsense has brought to playing field such as drive organic traffic and monetize with adsense, cough cough Demand Media cough. Google was not ready to kill the cash cow of content ads, so they improve their algo to remove sites and focus on brands killing off those small sites that are banking on arbitrage.

Since 2008 I have started to dive deeper and deeper into online marketing moving away from the standard path most computer scientists take as a software engineer. I have also been a huge 4 hour work week/Tim Ferris Fanatic as I was always under the impression I wanted a one man band business that made me money while I travel, enjoying the lifestyles of the nomadic and residual income. In the past 3 years I have learned a lot about business. Businesses may start from an idea to a minimum viable product (MVP) in a weekend, but it can takes years to build a sustainable business. Noah from Appsumo has built a million dollar business, starting with just one email and grew a list to over 500,000 within a year. He also doesn’t have unlimited funds for marketing, although I am sure Facebook and Mint have treated him well. I recently got to meet him at Search Love and quickly realized I am thinking too small, I need to think BIG, like Apple Stock BIG!

Spending a lot of time keeping up with the latest startups has allowed me to see the newer technologies out there, especially with online marketing, yet rely on old school systems, like cookies.

Demand Side Platforms (DSPs) and cookie pools are and becoming the next step in online marketing and are having a major impact on both paid and organic. Google has been making a LOT of changes this year when it comes to SEO, including an update to protect users by using https, which will not pass the referral to the website. Rand has since posted about Google Keyword Referral and how it’s a load of crap. On every one of the sites I own, one of the top 3 keywords is (not provided), fail! This update is OBVIOUSLY to target companies who do search retargeting. User does a search, save refer/keyword data in a cookie on users computer. User visits a site and the 3rd part ad serving system reads the cookie, matches the data, and the user now sees a more targeted ad due to this data. This is just the beginning…

Cookie pools are where companies can “market” to customers based on specific criteria (demographics, searched keywords, etc.) they have learned about the user from other websites leveraging a 3rd party cookie to serve to a DSP to reach that user online. It becomes even more crazy when you relate user data/cookie to an email or twitter user. Just imagine sharing all this data so a website visit could result in a @reply to a user who just visited the site and is still shopping/reading/etc. Is this possible, do companies do this and should it be scary or great user experience because now you are targeted.

User data from both search and behavioral as well as demographics plays a major role in terms of marketing to that user. Serving a banner and hoping for the best is inefficient as it’s not targeting, it’s not time to party like 1999. It’s time to take it to the next level with targeting, party like it’s 2099…

Speaking of targeting, I can not stand all these interstitial and sliding popups on news sites. Imagine all your favorite news sites with no advertisement. Seems like a pipe dream? If there is one thing that Facebook has taught is that users post up all sorts of useful information and now publicly! People are willing to give up their data for something of value, even if it’s small.

So let’s imagine userA is visiting an article on the New York Times about top 10 places to travel this summer. We know how these users are into travel adn most likely to spend money on traveling. Rather than NYTimes just making money with a banner ad, they should be charging the advertiser to allow for the dropping of a cookie. The advertiser could use DSPs to remarket the user and no one would know NYTimes was making money from this. The crazy part for me as an online marketer is the cost. From my current understanding NYTimes and most publishers do NOT charge different display rates if a cookie is dropped or not, why is this, ugh!

Okay, now back to the NYTimes, could they not only drop the cookie on the advertisers behalf, but provide other information, like pages they visited, demographic data because maybe userA was signed in and filled out the simple profile (male, age, income, etc.) a year ago when they joined. userA who then visits other sites could be targeting that user for travel sites and offer them travel deals. Hopefully someone at NYTimes is thinking on ways to make more money rather than trying to fit another banner ad on the page.

So there are 2 major differences with this revenue model. First, you can now have a clean UX/UI as you won’t need banners if you are dropping cookies and other demographic data you can provide to advertisers. Second, you can offer a lifetime on that user (unless they delete their cookies). If you are thinking big become the middleman. Meaning you can expire those cookies X days when dropped or better yet drop 2 cookies and limit the usage for clientX to userA data for online marketing with DSPs. In addition you could offer both AdFree or Banner Ad platforms for users who want to remain anonymous and users who want a better experience.

About 3 years ago I recall being at an event in NYC where a passionate entrepreneur was talking about how every startup can say they monetize because of Google Adsense, but it’s a pipe dream and the death of the banner ad is here. Serving non targeting banner ads is a waste of time, resources, and causing blindness (well ad blindness). The person at this event (wish I could recall his name) was so frustrated at companies that say their revenue model is advertisement aka Google Adsense that startups who spoke after his presentation would put their heads down in shame. Although advertisement is a big money maker, it’s very limiting and hard when your site gets below 1MM page views. Serving ads to traffic seems like a very inefficient way to monetize, you are just serving up an offer to someone who may or may not be interested. Banner ads have been around the block and back, the big difference now in 2011 than 1999 is targeting. You are not serving the same ad to a white male in North Carolina who likes hunting as a black female living in NYC. The event and presentation was even more interesting as it compared east coast to west coast startups much like rappers, east cost it’s about revenue – west coast is about the dream. Remember, startups that monetize via non-targeted advertisement are full of crap, IMHO. There is more to be sold than just ads, you need to think outside the box and data mining is just one direct, but there are many more.

Look at what Virgin America is doing to offset cost: Advertised Experiences, On Demand Movies, Brand Product Sponsorship, Upsells and cross sells. Offering a unique experience at a lower cost! Virgin is thinking outside the box and cleaning up, where as American Airlines … oh that’s right they are filling for bankruptcy.

Online products need to innovate to complete in the market today, not only as a product but also in terms of monetization. Everyone needs to step up their game. I know I know advertisement can be a HUGE money maker, just think of television. The cost of a super bowl commercial is crazy expensive, but think of the audience you can reach. This works great for products that have a huge distribution network like Budweiser or Pepsi, but not your startup and NOT most businesses. Although television is still cleaning up with advertisement, think about what targeting could do. Think about companies like FiOS – imagine rather than showing the same ad over and over, you are learning what individual watchers like or act on. Why do you think Hulu asks you if this ad is relevant, although targeting and violating someone’s privacy are two separate things Hulu, but I am sure they will learn.

Let’s move away from just advertisement and not only start to target and remarket, but take it the next step further offering details people want, like email Travel alerts for specific regions. This would be great for a person who wants to visit friends/family but doesn’t want to pay full price. Think of it more as a tool allowing you to add cities and get weekly email alerts for plane flights if they drop below $X. Now you could visit friends/family as you saw a deal come through rather than sit at home watching football all weekend. Building an email list and targeting users and learning what converts and what doesn’t would be a better model than writing blog posts about traveling and collecting those pennies from Google. So next step when you have to build out your business model, think of what else you could do to make money, non-targeted banner ads is the easy answer, but won’t result in a BILLION dollar IPO. Virgin America has MANY revenue streams, where American Airlines is about to go out of business.

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