Do-It-Yourself Display Ads

by

Wall Street Journal

By SHIRA OVIDE

Much of the valuable online-ad real estate is sold the old-fashioned way: through a salesperson.

But now start-ups and major Internet players such as Facebook Inc. are giving advertisers the option of planning, buying and tracking online-ad campaigns all on their own. Just as the ability to buy plane tickets online steered business away from travel agents, the self-service options promise to shake up the $20 billion online-advertising market.

Google Inc. built a $185 billion company largely thanks to its self-service model for buying the online text ads that show up in Web searches. The next front in do-it-yourself is the display-ad market. Display ads are expected to be 40% of the online-ad market in coming years. Until recently, such ads were too expensive to buy and too difficult to create for many companies.

“In order to really move into large masses of advertisers, display advertising has to be easier and simpler,” said Ajay Agarwal, managing director of Bain Capital Ventures. “Google did this with search advertising. We think the same thing has to happen with display.”

The self-service options have the potential to bring huge numbers of new advertisers and sites into online advertising, including small firms that currently find it too difficult or expensive to advertise online, or to advertise at all.

Andy Dunn is one of the new do-it-yourself-ers. Mr. Dunn is chief executive of Bonobos Pants, an online clothing company that says it makes “pants for real guys,” aimed at men who want well-tailored and fashionable clothes but hate to shop in stores. The company, which the 29-year-old Mr. Dunn launched last fall with a classmate from the Stanford Graduate School of Business, initially didn’t do much to market its wares. “We think advertising is pretty wasteful for a company like ours,” Mr. Dunn said.

But for a pants line aimed at Chicago Cubs baseball fans, Bonobos took a chance on Facebook’s new self-service ad system. In less than five minutes, Bonobos created ads that would be seen only by young men in the Chicago area who identified themselves on their Facebook profiles as Cubs fans. With a picture of the “Cubbie blue” pants — named Clarks, after one of the streets surrounding the Cubs’ home of Wrigley Field — and simple ad taglines like “pants for Cubs fans,” the ad was seen more than 250,000 times. Quickly, Bonobos sold out of Clarks, at $120 a pop. Total cost for the ads: about $63.

Mr. Dunn said that next time, he may spend thousands of dollars more on the Facebook ads. “It’s so economically compelling that we can’t ignore it,” he said. “This was five minutes of our time, and we sold through these very specific pants that otherwise we’d have a hard time finding our audience.”

Facebook is only one of a rising number of self-service ad options. There are new entrants such as AdReady Inc., AdBrite Inc. and AdItAll LLC. MySpace, like Facebook, is offering do-it-yourself ads that marketers can tailor to individual interests on the social-networking site. (MySpace, like this newspaper, is owned by News Corp.)

Time Warner Inc.’s AOL Internet unit and Google have new self-service ad options for the opposite side of the equation — for Web publishers who want to attract advertising to their sites.

The rising number of self-service options underscores the expanding market for display ads, the graphic- and video-heavy ads in fixed spots on a Web page. The market for display ads reached $5 billion in 2007, according to market-research firm eMarketer Inc. That is far less than the estimated $8.6 billion in spending for text ads tied to online search. But in coming years, the mix is expected to tilt in favor of display ads, thanks to the rise of online video and the increasing push of brand marketers such as car companies into the display market.

But for the majority of mostly small- and medium-size businesses, it remains too difficult and expensive to buy display ads. To create an ad, businesses have to navigate the 15 standard sizes and half dozen standard formats and design something that will be eye-catching. They have to pick which Web sites or networks to buy ad space from, test multiple ads, track which ones draw the best consumer responses and adjust marketing campaigns accordingly. Doing this alone is daunting, and paying an ad agency to do it might cost thousands of dollars. Sites such as Yahoo Inc. often require advertisers to promise they will spend tens of thousands of dollars a month on advertising.

“There’s no real solution for the smaller advertiser who wants to enter the display market,” said Aaron Finn, chief executive of AdReady, one of the new companies offering access to the market. Mr. Finn used to head marketing for Classmates.com, one of the biggest buyers of online ads, and launched AdReady last fall with backers such as Bain Capital LLC’s Bain Capital Ventures.

AdReady promises to ease the headaches and guesswork and to lower the costs associated with buying display ads. A Ford dealership in California can pick from a pool of templates and customize an image of a revolving Ford car with the dealership logo and contact information. Then, the dealer can buy ad space through AdReady on major Web sites targeted to reach only Web surfers in California. The system suggests tweaks, such as making the ad background purple rather than white, that have proven to draw more people to click on ads. Advertisers can spend as little as $20, and AdReady is paid a cut of the ad buy.

AdReady and other services also give advertisers the ability to tie ad spending to results. For example, an advertiser could see how many people viewed a car ad and how many people clicked on it. The car dealer could then decide it wants to turn off the ads that received the fewest clicks and run more of the ads that were more effective.

By drawing in new ad buyers, the self-service options also aim to address one of the nagging problems with the display-ad market: cheap prices.

As a flood of new Web sites compete for consumers’ eyeballs, sites such as Facebook are having difficulty raising prices for ads. The cost for reaching a thousand Web visitors can be as little as a few cents on Facebook or MySpace. Reaching the same number of viewers of a prime-time TV show can cost $30.

By widening the pool of advertisers vying for display space, sites believe they can increase the prices for their ads. Facebook Ads is seeing a huge influx of first-time Internet advertisers, according to Tim Kendall, director of monetization at Facebook.

Along with innovations such as ad networks, self-service options are hoping to do for the display-ad market what Google did for search: make it more accessible, cheaper and, ultimately, a much-larger business.

“There’s a huge market that’s still being untapped,” Mr. Finn said. “I think you’re going to open up the floodgates.”

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