Komodo Links: AdWords Demographic Bidding, Limiting Consumer Tracking on the Internet, Phorm Knows Everything About You

Today we have a short but very sweet edition of Komodo Links. This week’s edition is all about online consumer data, those who track and sell it, those who use it to target ads, and those who want to stop it. Read on and let us know what you think.

In January, Google invited AdWords advertisers to join a beta test of a new demographic bidding feature. Today demographic bidding is available for all AdWords advertisers. Demographic bidding is a feature that helps advertisers target ads to users of certain age groups, gender or a combination of both. Advertisers can use demographic bidding for both contextual and placement targeting and with CPC and CPM bidding. You can also use demographic bidding to refine your ad’s reach on certain sites in Google’s content network. Advertisers can also access demographic reports in the AdWords Report Center to see how well their ads are performing across different demographics.

Here is a perfect follow up to the AdWords demographic bidding announcement. The New York Times reported yesterday that New York Assemblyman Richard Brodsky has drafted a bill “that would make it a crime for certain Web companies to use personal information about consumers for advertising without their consent.” Yahoo and Microsoft have already sent lobbyists to meet with Mr. Brodsky. The article covers some interesting issues that this bill raises.

Some interesting highlights from the article:

“A law like this essentially takes some of the gold away from marketers,” said Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania. “But it’s the right thing to do. Consumers have no idea how much information is being collected about them, and the advertising industry should have to deal with that.”

“There has really been no harm shown by behavioral targeting or third-party advertising, so this rush to regulate the Internet is really unnecessary,” said Mike Zaneis, vice president for public policy for the Interactive Advertising Bureau, an industry group that represents companies like Google and Yahoo.

Moreover, Mr. Zaneis said, the New York bill threatens to undercut the business model that supports the Web. “If you take the fuel out of this engine, you begin to see the free services and content dry up,” he said.

And to finish up, check out Janet Meiners’ post at Marketing Pilgrim about the British company Phorm. Apparently Phorm is using British ISPs to track every single action a British web surfer takes to be able to show them ads. The company claims they have access to the surfing habits of 70% of all British households that have broadband.

Google Finally Gets EU Approval for Acquisition of DoubleClick

The European Commission announced today that Google’s $3.1 billion acquisition of DoubleClick can proceed without conditions. Google proposed the deal back in April to increase its sales of online display ads. Microsoft had vigorously opposed the deal saying it would hinder competition in the global online ad market. In the end Microsoft could only stall the deal, not kill it. You can read the rest over at Bloomberg.

Kelsey Group Annual Forecast: Interactive Advertising Revenues to Reach US$147 Billion Globally by 2012

The Kelsey Group released their Annual Forecast (2007-2012) today. The Kelsey Group is the leading provider of research, data and strategic analysis on directories, small-business advertising, online local media, vertical market advertising and mobile advertising. According to the Annual Forecast, the global advertising market will be fueled by exceptional growth in the interactive segment.

Some interesting highlights from the press release:

Interactive advertising revenues will increase significantly from US$45 billion in 2007 to US$147 billion globally in 2012, representing a 23.4 percent compound annual growth rate (CAGR).

“We see Internet development—including increased subscriber/user access and broadband penetration—as a driver of both interactive advertising revenue as well as migration of traditional ad spending to new media platforms.” -Matt Booth, senior vice president, Interactive Local Media, The Kelsey Group.

Interactive advertising, which comprises search (including local search), display advertising, classifieds and other interactive ad products, grew its share of global advertising revenues from 6.1 percent in 2006 to 7.4 percent in 2007. By 2012 Kelsey Group analysts expect the interactive share of global ad spending will reach 21 percent.

Directional advertising, which comprises local search, print Yellow Pages and Internet Yellow Pages (IYP), will grow from US$33.3 billion in 2007 to US$41.4 billion globally in 2012 (4.5 percent CAGR).

  • Local search revenues will grow from US$2.1 billion to US$6.6 billion (25.5 percent CAGR).
  • Print Yellow Pages revenues will decline from US$27.5 billion to US$25.6 billion (-1.4 percent CAGR).
  • IYP revenues will grow from US$3.7 billion to US$9.2 billion (20.1 percent CAGR).

What does this mean to a small business’s online marketing budget? My bet (and I’m really going out on a limb here) is that costs are going to increase as more small businesses begin advertising online. Cost-per-click (CPC) bids are going to increase for the majority of keyword phrases and advertising rates for local search directories and Internet Yellow Pages (IYPs) will increase.

Small businesses that follow best practices for search engine optimization and provide the informational content that online consumers want will reduce their dependence on online advertising for leads and customers.

Recession Resistant: Marketers Likely to Rely on Mobile, E-mail, and Search

Advertising Age published a great article yesterday, How Media Would Weather a Recession. The article covers all the major media channels and gathers opinions from some major players in media buying and selling. There is a general consensus among these media buyers and sellers that online marketing will remain strong through a recession due to marketers’ ability to accurately measure online marketing ROI.

Some highlights from the article:

Digital, said Bryan Wiener, CEO of digital agency 360i, is the least vulnerable media spend in times of economic downturn because it is inherently more measurable than other media. [Wiener] add[ed] that the categories that tend to drive the best return on investment are e-mail and search — so marketers are likely to continue investing in those categories regardless of the economy.

Search marketing, because it’s so closely tied to sales, more often is thought of as a cost of goods sold rather than a marketing and administration expense. Therefore, it is assumed to be the most recession-proof of all marketing channels.

“As consumers get more frugal, [Consumer Package-Goods] will shift their media to things that have a more immediate return on investment,” Mr. Garga said. “Shopper marketing is a captive audience in the store with an immediate effect. … Online is a medium, too, that supports more value-oriented messages.”

I highly recommend reading the article. It offers some great insights.

Microsoft Proposes Acquisition of Yahoo! for $31 per Share

The proposed deal, valued at approximately $44.6 billion in cash and stock, would provide a 62% premium to current trading price for Yahoo! stockholders. Microsoft claims the combined entity would be a more competitive company while offering greater value to stockholders and a better choice for customers.

Read the full press release.

Some highlights from the release:

The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners.

The combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile. Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity.

Microsoft has developed a plan and process that will include the employees of both companies to focus on the integration of the combined business. Microsoft intends to offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.

It will be interesting to see how this plays out.

Marchex and Idearc Media Announce Local Advertising Agreement

Marchex, Inc., a local online advertising company and leading publisher of local content, and Idearc Media Corp., home to Superpages.com and publisher of the Verizon Yellow Pages, announced a local advertising distribution agreement under which Idearc Media will place its Superpages.com performance-based advertisers on Marchex’s network of Web sites through Enhance Interactive, Marchex’s advertising network.

Marchex’s local network attracts more than 25 million unique monthly users who rely on the company’s more than 150,000 local Web sites to get relevant and refine-able information about local businesses nationwide. Enhance Interactive provides additional distribution across local Web sites, online publishers, and leading search engines.

This sounds like a good partnership to me. Marchex offers phenomenal reach to potential customers. As long as local businesses have effective landing pages and overall good website usability, I can see the value in paying for advertising on their network. I’m hoping that’s what Idearc means by “performance-based advertisers.” 😉

JupiterResearch Reports Local Online Advertising Poised for Significant Growth

Online local advertising is expected to grow substantially over the next five years, according to a recent report from JupiterResearch.

According to the US Local Online Advertising Forecast – 2007 to 2012, local advertising will increase by 13 percent from 2007 to 2012, faster than online advertising as a whole, of which a 12 percent growth rate is anticipated during the same period. But it will be local display and search advertising that are poised to make the biggest impact. With compound annual growth rates (CAGRs) of 18 percent and 16 percent, respectively, during the next five years, the categories will gain lift from an ongoing strategic push by newspaper and yellow pages publishers as well as improved local performance by the major search engines. While this trend represents a shift from old media to new media, it in no way suggests tactics of the past are becoming extinct. (Business Wire)

As the local search space becomes less fragmented it will become easier for small businesses to reach an ever-growing number of consumers turning to the internet to find local businesses. A WebVisible and Nielsen//NetRatings survey released September 2007 found that search engines are now the number one source for consumers looking for local businesses. As this trend continues it will be critical for local businesses to have an optimized website and effective online ad campaigns to gain new customers.

Online ad spend to leapfrog radio and magzines by 2010

AdAge is reporting that a new ZenithOptimedia forecast predicts total ad spend in North America to increase by only 4.1% next year, with global ad spend growing 6.7%. According to the forecast newspapers, magazines, and radio ad spend will decline over the next two years with TV ad spend remaining flat.

Online ad highlights from the AdAge article:

It’s only online, of course, that the media business looks both fun and easy. Worldwide internet ad spending will climb to $44.6 billion from about $36 billion, increasing its share of the market to 9.4% from 8.1%.

“We predict internet advertising to pass three milestones over the next three years,” ZenithOptimedia’s forecast said. “We expect it to overtake radio advertising in 2008; to attain a double-digit share of global advertising in 2009; and to overtake magazine advertising in 2010, with 11.5% of total ad spend.”

Other interesting ad spend topics covered in the AdAge article:

  • The quadrennial year: ad-boosting events such as the Olympics, a presidential election, and a European soccer championship all take place in the same year.
  • The writer’s strike and TV market share.
  • The shift in global ad spend from North America to markets “east of Eastern Europe.”

Data: Ad Outlays by Medium (pdf) provided by AdAge.