New networks chase per-click ad business

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Following on the coattails of the recent introductions of the PointCast Direct and DoubleClick Direct net- works, two smaller companies in recent weeks have unveiled their own click-through-based ad networks.

Aaddzz, from Information Access Technologies, which is still in beta, and ValueClick, from WebIgnite, which launched in late July, both aim to capture masses of small- and medium-size publishers, then sell to advertisers just those visitors who click through to the marketer's home page.


Marc Johnson, an analyst with Jupiter Communications' advertising group, said one reason ad networks are showing more initiative for click-through pricing than many large individual publishers is the power of numbers.

"You have to make it worth an advertiser's while by serving up enough click-throughs," said Mr. Johnson.

"L.L. Bean is not going to care about a couple of hundred click-throughs," he said.

Indeed, each network has so far been challenged to serve enough available impressions to generate adequate click-throughs to supply advertiser demand. PointCast is waiting to roll out the official 2.0 version of its software later this month before PointCast Direct can support more than the half-dozen current pilot advertisers, said Don Albert, VP-affiliate development at PointCast.

Kevin O'Connor, DoubleClick president-CEO, said DoubleClick Direct had nearly 30 advertisers and is "approaching 100 million" ad impressions a month from its 30 member sites. "This is the really difficult part of building a network," he said "You've got to have enough diverse inventory and enough [ad] offers for a system to become efficient."


Arthur Britto, founder and president of Berkeley, Calif.-based IAT, said the key to Aaddzz's click-through-pricing strategy is its powerful automated targeting that should raise click-through rates to well above the industry average.

Aaddzz weights the past performance of every banner and page against the past behavior of individual site visitors, then in real time determines which banner has the best likelihood for click-through.

DoubleClick Direct and ValueClick offer advertisers similar targeting capabilities.

Currently, more than 5,000 small and medium sites, mostly publishers, are beta-testing Aaddzz, Mr. Britto said. The official launch is at least a month away, he said.

Four weeks after its launch, Santa Barbara, Calif.-based ValueClick has 800 publishers, which combined generate fewer than 100,000 impressions a day, or enough to support only 20 advertisers for now, said Brian Coryat, president of WebIgnite.


ValueClick aims to make its impact on the market with bargain-basement prices. Presently, the network charges advertisers a fixed rate of 15 cents per click-through. Of that, ValueClick gives its publishers 5 cents to 10 cents , depending on each site's traffic and click-through rate.

Taking a typical CPM rate of $20 and an industry average 2% click-through rate, the equivalent cost per click-through is $1.

By comparison, ValueClick's CPC would equal a $3 CPM with a 2% click-through rate. "CPM rates on the Web are incredibly over-priced; everybody knows that," said Mr Coryat.

The Aaddzz network, meanwhile, lets advertisers set their own prices. Every time an ad is served, the system chooses among several ads targeted for the impression opportunity, picking the one offering the best price.

Jupiter analyst Mr. Johnson said that a variety of pricing models will emerge. Ultimately, he said, online publishers should prepare a broader offering than just CPM-based prices.

"The best bet for publishers is to have a rate menu situation where some ads are on impressions and some are on click-throughs," he said.

Copyright September 1997, Crain Communications Inc.

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