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Fredric Paul

Why Web advertising is different
(2/4/98)

At first glance, advertising on the Web seems like a simple, logical extension of advertising via other media. Just like a printed ad in a magazine or a television commercial, Web advertisers pay for the privilege of putting their message in front of an audience delivered by a Web site.


Instead of buying some portion of the attention of the total audience, Web advertisers buy a portion of the audience itself.
  Look a little closer, though, and you'll see some fundamental differences between advertising on the Web and advertising in traditional media. Those differences have a dramatic effect on Web sites that sell advertising and on the people who buy the ads on those sites.

Magazines and newspapers sell circulation, or the number of copies of an issue that will be distributed. In most cases, the advertiser's message goes along with every copy. If a magazine prints 100,000 copies, the advertiser pays for the ad to appear in each and every one of those copies. If the magazine prints 1,000,000 copies, the ad goes along with all 1,000,000 copies. Not surprisingly, million-circulation magazines typically charge more for the equivalent ad space.

Similarly, TV shows sell ratings, or how many people see a given show. Unless they happen to go to the fridge to grab a beer, viewers of the show will see the commercials broadcast along with it. If the ratings indicate a particular show is seen by 10 million people, the commercials are presumed to be watched by those 10 million people. (Of course, local ads are often swapped in for particular markets, but the concept still holds true.) Like high-circulation magazines, popular TV shows can charge more for commercial spots.  
If you bought 100,000 impressions on a site that delivers 1,000,000 impressions, 90 percent of the audience might not see your ad.

The Web works differently. Instead of buying some portion of the attention of the total audience, Web advertisers buy a portion of the audience itself. If you buy 100,000 impressions on a Web site, that's precisely what you're going to get. It doesn't matter how many total impressions the Web site delivers, your ad will be seen only by the 100,000 people you paid for.


Web sites sell impressions, not the total audience.
  For example, if you buy 100,000 impressions on a site that delivers 1,000,000 impressions, 90 percent of the site's audience may never see your ad. (I'm fudging a little here, since most visitors to a site look at more than one page, but you get the idea.)

That's an important point for advertisers to recognize, but it's even more important for Web sites that sell advertising. As magazine circulation grows (or TV ratings climb), each unit of advertising becomes more valuable, and more expensive. All things being equal, selling 50 pages of ads in a 1,000,000-circulation magazine earns a lot more money than selling the same 50 pages in a 100,000-circulation magazine--for the same 50 deals. Just as important, if more people want to buy ads, magazines can print more pages to carry them; they don't need additional readers to sell additional ads.

On the Web, however, you're selling impressions, not the total audience. So as your audience grows, instead of getting the opportunity to sell the same impressions for a higher price, you merely get the opportunity to sell more impressions. Conversely, if you have great advertiser interest in your site, you can't sell them anything unless you can deliver the impressions.  
Opportunities for successful Web sites to scale up revenues are not as clear as they are in print and television.

The result is that opportunities for successful Web sites to scale up revenues are not as clear as they are in print and television. Unlike paper publications, you can't simply print more pages of ads and send them along to your audience, earning revenue that drops right to the bottom line. It's likely that even successful Web sites will have to make a comparatively greater investment in their sales efforts than their counterparts in traditional media. That's especially true right now, while the Web advertising business model remains largely unproven.

Read more from Fredric Paul

Fredric Paul is editor of BUILDER.COM.

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