Why Google crushes AOL and all other ad networks

November 7, 2007
By

The NY Times and others have recently reported on AOL’s woes with regard to online advertising revenues.

And here’s why they, and all the rest of the ad networks, will continue to get crushed by GOOG. It’s right there in the above screenshot taken from advertising.com, AOL’s ad network. Google “gets” the Long Tail — these other guys are stuck in a 1980′s view of the world (or is that 1950′s). While the rest of them are out there looking for only the elite “big” customers, Google is sucking in all the money from the millions of tiny sites that display vastly more ads in the aggregate.

With Google, one can literally setup a site using the company’s own Blogger service and be displaying Google ads in a very short time. Why any of these ad networks (and especially affiliate networks) reject ANY site is beyond me. If they want to make any kind of a dent in this space, they have to get their costs down so low, get the system so automated, that the cost of a “partner” (publishing site) is so low, that they don’t need to reject anyone from participation. The ad delivery cost must be so small that you want those ads to appear on every possible site all day, every day. Having a “minimum hits” requirement is just shooting yourself in the foot and leaving the lion’s share of the money on the table.

If you look at the Google model, this works because the advertisers bear the burden of those costs. If the ads don’t perform (don’t get clicked enough), Google charges the advertiser more, or makes them fix the ads to get better click-through rates. So ads are only being shown if they are being clicked often enough to produce cash, regardless of the site they appear on. Google doesn’t have to spend a lot of time checking the sites displaying the ads because they push the problem back to the advertisers to fix for them.

These other ad networks have to wake up to this or they will continue to fight over the scraps left behind by the big dog, now spelled GOOG.

One Response to Why Google crushes AOL and all other ad networks

  1. November 7, 2007 at 10:48 pm

    Online advertising is an auction market, and listing your goods on the biggest market tends to get you the best price.

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