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Pros and Cons of Online Advertising

The booming online advertising industry poses an interesting question: is online advertising really an efficient way of marketing. To answer this question, let’s first analyze the pros and cons of online advertising.

One of the biggest advantages of online advertising is that it is based on the worldwide Internet which means the range of influence is virtually infinite. Also, the popularization of Internet enables online advertising to become mainstream of the future way of marketing.

What is more, due to the advent of multimedia, creative advertisements on the Internet are no longer like the old-fashioned advertisements both on newspapers and TVs, instead, they can attract customers more by the utilization of movie clip or flash. Furthermore, the comments of customers give some more objective information about the products.

To customers, they are no longer in the passive position as they used to be when watching TV, instead,  as the blog I cited mentioned, “they (advertisements)  disappeared as soon as the user scrolled down”, customers now have the freedom to choose whether to acquire some useful information from the advertisement or skip them without paying any attention.

What is more, due to the huge capacity of the Internet, customers can compare different products at a glance and can obtain almost all the information about a company by clicking into the link that online advertising try to promote.

However, the developing online advertising still raises many problems not only to the slot-selling companies, but also to the slot-buying ones.

First of all, price setting for the advertisement slots  remains a problem. Although the idea of calculating the price by multiplying the click-through rate by the value created by a single click is introduced, it is still hard to set the price accurately because first of all, it is difficult to determine the actual click-through rate since aside from the popularity of the website, the popularity of the advertisements also determine the click-through rate, which can only be determined when the slot is sold. Therefore, in order to promote the products, some buyers may bid extraordinarily high for the popular slot while end up paying little money to the sellers because the number of clicks is not that many as previously anticipated. Even if the quality factor is introduced, it is still hard to calculate the quality because it is an abstract concept.

Additionally, to buyers, are the online advertisements so efficient in promoting their products? The answer is not necessarily yes. First of all, Internet is not as popular as the “old-fashioned” media such as TVs, newspapers and magazines especially in developing countries. Secondly, how many of us really notice the advertisements when browsing the Internet? Sometimes even the browsers automatically filtered the annoying pop-out advertisements for us. If that so, The investment on the online advertisement turn out to be a complete failure. Also, the calculation of the price by the search engine instead of determined by “invisible hand” also put buyers in an disadvantaged position. As a result, since the ad quality factor is under the search engine’s control, it gives the search engine nearly unlimited power to affect the actual ordering of the advertisers for a given set of bids. When the sellers making a fortune by selling out the slots (for example, Yahoo harvested 6.5 billion dollars on 2009!), the buyers are actually unsure about the influence of online advertisements on their actual revenue.

The author of the blog, however, pointed a new strategy of online advertising for us, that is, instead of “getting people to click on ads”, the advertisers should  “treat with suspicion the idea that it’s possible to deliver a beautiful, self-contained brand proposition online”. What matters, as he pointed out, is not adjacency of the advertisements, that is, the popularity on which the advertisements are posted, rather, it is the third-party content. The reason why TV commercials seem to be more attracting than online advertisements is that more emphasis is put on the content of the advertisements instead of the popularity of the TV channels.

Reference: http://blogs.reuters.com/felix-salmon/2011/11/14/the-future-of-online-advertising/

 

 

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