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Online Advertising’s Big Dilemma

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Since Alex Tew achieved his goal of selling 1,000,000 pixels for as many dollars, more than 10,000 copy-cat pixel advertising sites have sprung up from the wells of various corners of the web, all with different themes and offering different incentives to advertisers, but ultimately offering the same thing.

Like many of the most enterprising success stories, the concept of “The Million Dollar Homepage” is extremely simple: a twenty-two year old University student decided to, in order to pay for his education, set up a website and “sell” front page space in the form of image pixels which linked to the advertiser’s web space, limiting the number to one million. What is so remarkable is not just the fact that he sold the entire lot, but the time period in which he achieved this. In just three months Tew has gone from an anonymous student in debt to a millionaire celebrity with a waiting list for international primetime interviewers that most of Hollywood would be envious of. The degree of professionalism that Tew demonstrated in undertaking this project was quite remarkable too: from garnering the initial publicity to independently soliciting a fully-fledged New York PR consultant to hiring a team of website coordinators to manage the sudden uptake in volume of purchases (pixel images need to be uploaded – not an easy feat when there are backlogs in the hundreds of thousands) and visitors, Tew demonstrated management sophistication that is remarkable by any comparison.

What “The Million Dollar Homepage” demonstrates above all, however, is how little the technology boom of the turn of the millennium has actually subsided. The very fact that in three months sophisticated corporate advertisers are willing to part with more than a million dollars to grab space on the front page of an erstwhile student’s homepage echoes ruminations of the days when “.com” was the end of every large corporation name. What is more startling is the number of these ‘copycat’ Million Dollar Homepages that have actually gone on to become successful business models in themselves: not content to have missed the ‘link-rush’ first time round, corporations are now blowing cash on the front pages of imitation sites.

For some time a groundswell has been developing in the form of online ads. From Google Adwords to pay-by-click, revenues in this disruptive trend have been on a consistently wild increase.

Clicking Riches

The recent press and lawsuits concerning the rise in fraudulent “clicks” generated by both advertisers and competitors in order to drive up prices and drive out competition should sound warning signals to any devotee of this new trend. It seems that in some cases, up to half of all “clicks” from purchased online advertisements have been fraudulently produced. The system is easy to manipulate, after all. The way it works is two-fold: either you pay as the advertisers have for Million Dollar Homepage space – as a one off fee or as a monthly installment, regardless of the number of people who visit your website, or you pay by the number of visits generated to your websites as a result of your advertisements, such as with Google’s Adwords. The problem with the former is that there is nothing to stop the provider of the advertising space to keep ‘clicking’ on an advertiser’s link to make it look as if they are receiving more interest than they actually are, and thus giving them incentive to keep advertising with you. The problem with the pay-by-click method is that competitors can easily keep “clicking” your ads, driving up advertising revenues, and significantly cutting into a firm’s marketing costs; indeed, this has been the case with a number of advertisers already.

To put a hypothesis to the test, I purchased some space on copycat Million Dollar homepage sites for my site, “The Global Perspective.” The result so far has been predictable but worrying for those hoping to translate advertising dollars to pocketed dollars – a large increase in website hits, but no net change in the variables that count. As far as this weblog goes, “comments” and “trackbacks” on posts are the revenue streams, and while the hit rate has soared four times on the first day, there has been no increase in the number of comments or substantial increase in the number of viewers viewing anything other than the front page (i.e. not looking at past posts). This behaviour is in stark contrast to visitors from other sources (such as other blogs). If visitors are not willing to trawl through and contribute to a free forum, this hardly bodes well for those who are hoping to sell goods. Add to this that while there was a reasonable rise in hits in the first few weeks of advertising, the links have fallen off and generated a meager three hits a week now.

Sergio Zyman, in his controversial bestseller, “The End of Advertising As We Know It”, correctly pointed out the tendency for advertising companies to emphasize features and artistic merit over the key objective: selling the product. In a similar way, it seems the Online Advertising medium in itself is being sold largely on the bulk of its own hype rather than its clear-cut statistics for product sales: typical boom-bust market behaviour.

Online advertising bears a striking resemblance to the typical boom-bust phenomenon. That’s not to say that it isn’t a long-term viability – it surely is once technological sophistication has caught up with the conceptual pitch, which advertisers are buying into, but there will be tears after all the champagne corks have been popped. It will only take one or two major corporations to declare a significant increase in net marketing costs due to online advertising with no substantial increase in sales and pull out of the fracas altogether for the industry to collapse into a “bear” run, and only then will online advertisement providers have the incentive to spend on tightening up “tracking” sophistication to prevent fraudulence, despite all the current spiel about how much work is being done in this area right now. What Tew has done is what many a savvy entrepreneur does: seize a trend just as it’s rising, and serve it up with youth, attitude and sex appeal. The warning signs are already there however: when Tew’s site was hit by a DOS attack shortly after he auctioned off the last 1000 pixels on his website for over $35,000, the bidder filed a lawsuit for the lost advertising he had anticipated to come out of the purchase. When this is the way customers begin behaving, it is usually an indication of industry warning signals.

But for now the internet advertising phenomenon and the sensation of Alex Tew and Google have given a depressed market PR cycle a much wanted glimmer of hope that there are still gloriously quick riches to be found out there. Like all boom-bust trends, this is going to be long party with a giant hangover at the end of it.

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About Daniel M. Harrison

  • http://www.ohtheblog.com DE

    I have seen a rising number of click fraud cases from overseas.They are smarter then us at hacking into Google and redirecting the money to their accounts.The money from ads has definately gone down due the number of people trying to cheat the system.

  • http://www.pixelblogsoftheworld.com Norm Yerke

    Daniel, it’s interesting, I found your blog somewhere? I wrote regarding the writings on partial birth abortions.

    Now I want to tell you about the latest pixel advertising venue http://www.pixelblogsoftheworld.com. Try it and let me know how it works for you. Thanks much, Norm

  • http://shopping.babydave.org/1001techietees.htm David Anderson

    Daniel.

    Here is another self-serving comment on the million pixel ad trend. My Shop-a-Rama Family has created a series of one million pixel T-shirt pages which we hope add something credible to the concept. All our content is on a single theme and all the advertisers come from within the Cafepress shopkeeper comunity. There is a touch of guidance for the potential t-shirt purchaser and a bit of interactivity comparable to a rack of t-shirts or a box of old LPs. In the end each page will have just over 1,000,000 pixels worth of T Shirt design images.

    It would be great to hear what others more steeped in the advert biz think of our take on the current trend. Enjoyed this blog entry.

  • http://www.quasar.co.in Manish Vij

    Great Article…Can anybody help me out with points to be kept in mind, to prevent click fraud to maximum, while developing a click based advertising network.

    Thanks
    Manish

  • Rob

    You’ve got a really good point, I’ve often wondered what many companies were really thinking with buying all this adspace, who really clicks ads anyway? Most people like getting things for free. I’m thinking once this huge ad craze is over the internet is going to get a lot more pricey to surf.

  • http://www.tshirtpixels.com Brian

    I think alot of times it is not that people “do not click thru ads” people click through ANYTHING that atttracts thier attention. If it is an ad they will click if it is a link to more information they will click. It really depends on WHAT the person is looking for at the time and it all becomes a numbers game. As the internet swells from millions of pages to Billions and then TRILLIONS of pages each individual page is going to have less of an impact and as the EYEBALLS also increase then each page has more of an impact just on a smaller group of people. I think it will all be about NICHE marketing. The person who CORNERS a a NICHE will do well more and more people will feel less inclined to “SURF” and will just stay in thier own safe zone. They will only click on TRUSTED sites and more importantly only click out of those trusted sites to other sites that become trusted because of the first site. I think GOOGLE is going to have to police itself better or it will no longer be a trusted site.

  • Nancy

    My question is, why do advertisers kid themselves that ANYBODY in their right mind is going to click on their ads? Most people – like me – loathe ads in any form and avoid them like the plague. They certainly don’t seek them out. Which leads to another gripe: why do advertisers think that obnoxious pop-ups & flashing ‘blinkers’ are going to sell their crap? I can bottom line guarantee that such tactics are only going to ensure that I DON’T spend a nickel on your goddamned junk or whatever you’re peddling. Alienating potential customers by in-their-face ads is NOT a good way to get business. Only someone with a screw loose thinks it will. Personally, I think all advertisers should fry in hell.