Month: January 2009

According to Wikipedia:

Click-through rate or CTR is a way of measuring the success of an online advertising campaign. A CTR is obtained by dividing the number of users who clicked on an ad on a web page by the number of times the ad was delivered (impressions). For example, if a banner ad was delivered 100 times (impressions delivered) and one person clicked on it (clicks recorded), then the resulting CTR would be 1 percent.

The click-through rate measure is the key enabler for the pay-per-click (PPC) advertising model, where advertisers only pay when a user actually clicks on an advertisement to visit the advertisers’ website. A testament to the success of the PPC model is that it accounts for the overwhelming majority of Google’s $20B+ annual revenue.

Most of the attention to CTR has been ad-centric. The quality of an ad–or, rather, of how well an ad is targeted–is largely measured based on its click-through rate, average over all of the users to whom it is presented.

Google, in particular, requires advertisers with a low CTR to place a higher bid per click. The relative ranking of ads reflects a product of the bid and the CTR. This product can be interpreted in one of two ways: either combination of the advertister’s and users’ interest, or as the expected revenue that the ad will generate for Google.

But there is a different way to look at CTR. Instead of looking at the aggregate behavior for an ad across all users, why not look at the aggregate behavior for an user across all ads?

For example, consider a user who never clicks on ads. Perhaps the user is using an ad blocker that the search engine cannot detect, or the user may simply be ignoring the ads. At the other extreme, there are users who click on ads at higher than average rates (though some may be bots committing click fraud).

Of course, all user behavior is averaged  in calculating the CTR for an ad. But a user-centric view suggests a a couple of advertising personalization strategies:

1.  Don’t bother showing ads to a user who never clicks on them, since there is no value in doing so. If ad display alone is valuable in influencing users, then there should be a cost-per-impression component, though that would require a reliable way to determine that the user actually sees the ad.
    
2. Calibrate the threshold for ad quality (i.e., the minimum CTR across all users) to a user’s propensity to click on ads. Doing so could reduce the annoyance of people with high thresholds while increasing the ad revenue from people with low ones.

It’s clear that enough people click on ads to keep search engines in business, and that the easy availability of ad blockers (AdBlock for display ads, CustomizeGoogle for Google’s PPC ads) has not made a dent in this revenue stream. Nonetheless, showing ads to users who don’t click on them degrades user experience without generating revenue for anyone–a lose/lose.

Personalizing advertising based on a user’s demonstrated inclination to click on ads feels like a no-brainer. Has anyone tried it?

Two posts that I read recently raise the question of whether the information economy has become too efficient.

In “The Implications of the Information Economy” (via Oscar Berg), Rachel Happe argues:

The information economy has created a better informed but often impulsive consumer and it has created a networked information effect that ripples quickly through society allowing small pieces of information to set off a disproportionately large reaction – some positive and some negative. Like never before we can also act on information immediately creating economic whiplash.

In “Are We Losing the Narrative Self?“, Michael Goldhaber discusses how we are losing the concept of defining ourselves through our histories in favor of a more reductionist approach where:

You are your current set of interests, contacts, Twitter postings, Facebook postings, blog postings, listserv controversies, your latest images, and YouTube videos — trapped in an eternal but changing present that gives no sense of birth or death or growing up, or even growing at all.

I’m hardly a Luddite, but I sympathize with both arguments. I applaud the technical advances that have made information flow so efficient, but I also recognize that our cultural evolution has lagged this technological progress.

We’re in similar situations with regard to trust, privacy and connectedness. Our ability to transmit data has far outstripped out ability to comprehend information, and our initial reflexes tend to promote the superficial.

Historically, technical advances that improve the flow of information have done far more good than harm. Just consider the evolution from scribes to the printing press to digital libraries as an example. Yes, we also ended up with reality TV shows and Perez Hilton, but overall we’ve made progress.

Perhaps technical advances will help us overcome the same superficiality they have promoted. If not, it will be up to our own cultural evolution to catch up.

Today, when I was looking at recent Twitter updates from the people I follow, I saw one that read:

Just started using http://twply.com/ to get my @replies via email. Neat stuff!

Curious, and perhaps a bit groggy from last night’s festivities, I signed up for a free account. I then found that twply sent out a tweet on my behalf with the same “neat stuff” message. I deleted the message immediately (to the limited extent that one can delete anything on Twitter), but I was quite annoyed. And I’m not the only one.

I’m a big fan of viral marketing, and I think it may ultimately supplant advertising as the main way we find out about new goods and services. But what twply is doing is hardly viral marketing. Rather, it is sending out spam intended to simulate endorsement. And their approach clearly even brings short-term results, perhaps even enough to offset the cost of the backlash against their spammy approach. Even Facebook learned its lesson when it had to scale back its Beacon system, that would have taken a similar approach on a larger scale.

The other day, Ben Kunz wrote a satirical piece about a business model of selling our opinions. At least in his “modest proposal”, I imagined I’d be a willing and compensated participant. Now I find that I unwittingly sold my opinion for nothing!

I hope the backlash against twply discourages other companies from pursuing this approach. Personal endorsements and recommendations are an extremely important source of information, especially in a world of information and advertising overload. Undermining their integrity undermines this oasis in a sea of untrustworthy sources, and it’s an oasis we have to protect.