The Evolution Of Online Advertising Into The Social Age

Mad Men AdvertisingOne of the greatest inventions (if not the biggest) since the TV was invented is the internet. There isn’t any other thing on the planet that basically managed to connect all the world together, than the virtual world. The web became such a necessity, people sometimes even needs it more than water.

And Naturally, wherever there is such gigantic human consumption there’s also money involved. A lot of money. Tremendous incredibly ridiculous amounts of money.

Fee For Ad Space

Almost simultaneously with the wide spread of the “internet epidemic”, another industry came to life- Online advertising. The broad global exposure within a click of a button, quickly led websites to profit from virtual visitors they had by publishing ads on their site’s pages, as this earning-idea was already well established over the traditional media (newspaper, magazines, etc).

At the beginning, online business owners simply offered some advertising real estate space on their sites for the highest bidders. Nothing too sophisticated- Pay a fixed-fee and get your own page’s space where you can post your ad, where the connection was direct between the site owner and the advertiser.

Ad Networks Arrival

Around 1995-1996, online advertising networks arrived. They connected between the site owner and the advertiser, for a share of the profits of course. Those advertising networks proved to be a giant success story as they increased the revenue of online business owners significantly and made it easier for advertisers to find suitable sites to advertise at.

Until about 2003, these kind of online advertising networks flourished. And then came AdSense.

Google AdSense Nice LogoFully Automatic Advertising

In fact, the story of AdSense already begins in 1998 when two friends have founded the company Oingo, which developed search algorithms. In 2003, Oingo (at that point it was called Applied Semantics) was acquired by Google and a few months later, Google AdSense was launched based on Oingo’s algorithms.

AdSense made online advertising fully automatic- Site owners receives a simple code to install on their pages, the AdSense algorithms are crawling these pages and according to the content on the page they are matching the most relevant ads to show. No more searching for advertisers, no more searching for suitable sites, no more bidding wars. AdSense will do everything for you.

AdSense easily became the most popular online advertising network for websites, where it generated the biggest amounts of profits for websites and obviously also for Google (with a 68%-32% split in favor of the site owners). It made Google what the company is still today, king of the web.

But now, there’s a new threat on Google’s online advertising hegemony. Social ads.

Personalizing Ads For The User

New element entered the online advertising game. It’s no longer only about the website and the advertiser, it’s now also about the USER. The rapid growth of social networks, which knows the user better than all, allows them to offer the users themselves personalized ads. And above all social networks stands the queen, Facebook.

Facebook AdvertisingFacebook’s social ads already generates the company great profits- Just in 2011 the social network had profited $1 billion out of $3.7 billion in revenue. That is a 27% profit margin, which it amazing when considering how young Facebook and its ad products are. It is safe to assume that the company would even manage to increase this margin after the launch of its new ad products.

The realization that social ads may be the next evolutionary stage of online advertising are one of the main reasons Google has launched its own social network, Google+, last year and integrate it obsessively inside all of its products and also changed its privacy policy so it could use Google+ users information across its products and services.

But even though the number of Google+ users is growing exponentially, there are studies showing that the users engagement rate with the social network is the lowest among the leading social networks. This is probably the result of the deep aggressive Google+ integration- Many are joining, but not actually engaging with the social network.

Understanding what the user likes or not, who are his friends and what are they recommending, it is crucial for Google in order to serve effectively personalized social ads. And in the volatile technology world of today, you can’t afford to stay behind for long…

So, this is where we stand today. The next chapter of the online advertising evolution is about to be written. Hold tight, it is going to be a hell of a drive!

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