Fixing Online Ads

SmartMoney Finds Using Fewer Ads Can Boost Click-Through

Users More Likely to Pay Attention When There Aren't So Many Units

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NEW YORK (AdAge.com) -- When it comes to the supply-and-demand balance of online advertising, the supply side is winning -- and that's hurting click-through rates and CPMs, and worrying premium publishers that need to boost both to underwrite their content.

But in one case study, a publisher has managed to buck the trend of declining click-through rates with a potential solution: creating scarcity.

Fixing online ads
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The idea is to reduce the number of ads, especially the low-performing ones, which should lift a site's aggregate click-through rates and eliminate some of the excess inventory that wasn't sold, anyway.

In October, the online arm of personal-finance magazine SmartMoney got rid of display advertising "below the fold" -- ads in places farther down a web page. The site noticed that click-through rates had dropped in the past year, and it had lost advertisers as a result. Finance is a category, after all, in which advertisers are focused on performance metrics: How many savings accounts or brokerage customers is a site delivering? Additionally, the financial crisis has caused many of SmartMoney's endemic advertisers to pull back on the number of publishers from which it buys ads, and SmartMoney wanted to show performance that was good enough to stay on the buy.

"There's only so much focus that a reader can have on a page," said Bill Shaw, publisher of SmartMoney and SmartMoney.com. "You have three ad units, but a reader's only going to click on one."

SmartMoney's experiment
So SmartMoney cut the number of units on a page from three to two, eliminating a skyscraper ad that ran toward the bottom along the edge. The result: a 21% increase in aggregate click-through rates. Some advertisers that had quit buying the site have returned, including Scottrade and Options Xpress. And the site was sold out in the fourth quarter, though Mr. Shaw said that trend hasn't continued in first quarter.

"The fundamental theory of what we're doing is not only limit supply but make sure the supply we have makes sense," he said. "I don't think advertisers care if they're paying a $15 to $20 CPM as long as they're getting the right audience and performance."

After it axed the low-performing skyscraper, leaving two display ads per page; SmartMoney added a second ad to the home page. It still runs Google text ads below the fold and uses some space and buttons to promote its own content and offers. Incidentally, the redesign had another benefit: better user experience, which resulted in people sticking around longer and visiting more pages. The site's traffic, however, was about 800,000 unique visitors in December, down from more than 1.2 million a year earlier, according to Compete. SmartMoney said it lost, at most, 30% of its ad inventory but probably gained 15% to 18% in page views, ending up down 12% in total impressions.

Augustine Fou, senior VP-digital lead at MRM Worldwide, lauded the strategy. "We're coming from a world where a site that was attractive had to show it's getting tens or hundreds of millions of impressions," he said. "But advertisers are starting to realize simply having hundreds of millions of impressions isn't that important if they're getting 0.002% click-through rates."

Initially, the theory of cutting ad impressions seems to run counter to years and years of attempting to create more ad inventory by goosing page views through juicy, click-inducing headlines and slideshow-based stories and photo pages.

When to serve
Some critics argue that cutting supply only decreases revenue and that publishers should instead focus on finding other ways to monetize low-performing inventory -- ways that don't undermine their own sales efforts, such as turning the ad space over to ad networks.

"If every publisher on the internet collectively decided they were going to cut the number of ads in half, it's a wonderful idea," said Frank Addante, CEO of Rubicon Project, which helps publishers manage their inventory and ad-network relationships. That, of course, is hardly likely. But, he said, publishers need to get better at knowing when to serve an ad and when not to, and making sure the quality of the ad doesn't devalue the site.

Mr. Shaw acknowledged that there are short-term revenue implications but said the underperforming ads were worth so little to advertisers and, when ad-serving fees were factored in, they really were never much of a revenue driver in the first place.

He said he's also concerned about the bigger, long-term picture. "With magazines, you can cut your rates, but you're never going to get it back. In TV they're not giving away prime time at the same cost as late night. But that's what we're doing here. We've devalued the medium, and we need to get that back."

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