By: Jay DeFoore and Lesley Messer
Contextual advertising, those short, text-based links that appear next to a Web site’s content, is one of the hottest areas on the Web, thanks in large part to the success of Google’s AdSense network. But now that pay-per-click advertising has grown into a $3.1 billion business, according to the latest figures by Jupiter Research, Google is facing a growing host of competitors.
One Google competitor, New York-based Quigo, has had particular success in the newspaper sector, thanks in large part to a business model that allows local publishers to keep their existing advertiser relationships in-house.
Whereas Google manages all the advertisers that place pay-per-click (PPC) ads into its system, Quigo’s AdSonar product allows newspapers to sell the low-priced links to the local auto dealers and furniture companies.
Quigo CEO Michael Yavonditte says the company’s model of allowing publishers to control prices and control what he calls the “online marketplace” is a “game-changing” innovation.
“You can’t continue to grow if you continue to outsource such a big component of the editorial/advertising/publishing food chain,” Yavonditte says. “I’m trying to empower publishers into building new businesses. With Quigo, advertisers can buy ads in the middle of the night with a credit card, and results are easily measurable. They can buy in bite-sized morsels.”
After signing up its first newspaper customer, Newsday, last year, Quigo is now working with dozens of metro papers across the country.
Jamie Johnson, interactive operations manager at the Denver Newspaper Agency, said the ability to work with local advertisers was that the main reason he chose Quigo.
“In a Google type of situation, Google is the one who is the stopping point and the one communicating with advertisers,” he explains. “With Quigo, we can get face time with the advertiser and build a relationship. When people come to the site and decide to do self-service advertising through Quigo, it’s our interface. They’re connected with us instead of an outside vendor or company. … As an industry, we put ourselves in a strong position if we form relationships with our advertisers rather than hand those relationships to a competitor.”
To date, Johnson said the Denver Newspaper Agency’s PPC revenue had increased by about 500% from December, when the company first started using Quigo.
E.W. Scripps, which owns and operates the Web sites for The Rocky Mountain News, Cincinnati Post and Albuquerque Tribune, among others, recently began installing Quigo’s AdSonar on its sites. Jay Small, director of online content and operations for E.W. Scripps, says the Quigo model is “pretty painless.”
“What Quigo is doing is really optimal for a local news site,” Small said. “They give you a mix of sales and revenue opportunities broader than a Google AdSense program, which is pretty much the same for us as it would be for a blogger or someone running a niche interest site,” Small explained. “I think Quigo has taken contextual advertising genre and packaged it in a way that a local media site can very easily adopt it as a sales program.”
Small said Scripps studied the competitors, but ultimately chose Quigo because it “represented a good mix of flexibility in terms of sales models, self service tools, and a very easy to understand consumer experience.”
While Small sees keyword-based advertising as a growing revenue stream for his online properties, it isn’t the largest slice of the pie by any stretch.
“You’ll still see traditional banners, towers, and tiles” on Scripps’ sites, he says.
Ken Sands, managing editor of online and new media for The Spokesman-Review (Wash.), says the lack of local control with Google’s AdSense has him starting to look elsewhere for a contextual advertising solution. Currently, he says, most of the ads that are featured through AdSense on The Spokesman-Review’s Web site are national, which means local advertising dollars are going uncollected.
Still, Sands says the revenue from contextual ads, no matter the vendor, is never as high as one would hope.
“I think it’s been just really pennies. Hardly worth bothering with,” he says. “I think the very first people probably had individual agreements with Google that were maybe more lucrative for them than the rest of us who trail behind.”
In order to squeeze the most out of the contextual ads business, Lorraine Ross, vice president of advertising and sales for USAToday.com, said her site uses several different contextual advertising vendors, including AdSense.
Although the money from contextual ads is not making sites rich, most publishers feel the need to diversify from traditional display advertising. And more and more companies are looking to deliver on the pay-per-click model Google helped popularize.
Earlier this summer, Yahoo unveiled a PPC beta program called the Yahoo Publisher Network, and Microsoft is said to be developing its own model.