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Tuesday, August 08, 2006

Mac OS X's Web Clips and advertising

Web Clip
At this year's Apple Worldwide Developers' Conference, Steve Jobs gave a sneak peek at the next version of Mac OS X, codenamed "Leopard". I won't analyse the whole thing. Rather, I'll focus on one small part: Web Clips.

A web clip is, essentially, a clipping of a web page. A clipping of a newspaper is a small section of a news page, usually an article or advertisement of interest. Similarly, a clipping of a web page is a small section of a web page, again, something that is of interest. It can be a text block, an image, video, or all of them. It can be as big or as small as it needs to be.

It was the first demo that got me thinking. What happened was that Scott Forstall, who was demonstrating it, made a web clip of the Dilbert homepage. He resized the clip so that only the comic strip was shown. Nothing wrong there.

Except the rest of the web page had "disappeared". In particular, advertising. The Dilbert website is free to use. No one pays an extra cent (on top of normal Internet charges) to access the website, read the comic, etc. Yet someone has to pay for the website's bandwidth. Scott Adams probably could foot the bill, but he chose to run advertisements.

Here's how advertisements work online: the website owner allows advertisers to put their advertisements on his website. In return, he gets a nice sum of cash. But his pile of cash becomes bigger if his website is seen to be valuable to the advertisers.

It used to be that a website's value was based on how many people visited it. Now, it depends on how many people click on advertisements. The more people who click on advertisements, the more ideal the website seems. That's because clicking on advertisements indicates strong interest in the product/service being advertised.

More clicks = strong interest = relevant audience = valuable website = more cash for website owner.

Of course, I'm over-generalising it. But that's the idea behind click-through rates (CTRs). CTR = number of clicks / number of impressions. Therefore, more clicks = higher CTR (good), and more impressions = lower CTR (bad).

Coming from an advertising agency and dealing with analyses, I know that CTRs still carry a lot of weight in reports. If a website fails to garner high CTRs, chances are, we won't bother to recommend it for future advertisements.

Back to Dilbert and Mac OS X's Web Clips. On dilbert.com, advertisements are placed in "strategic" locations, e.g. at the top of the page, at the side, etc., but away from content. What Web Clips does is it "cuts away" all of these extra bits, leaving behind the "meat" of the page. To the end user, that's good news! No more irritating advertisements!

To advertisers, it means fewer people are seeing their ads. If I understand web clips correctly, the whole web page (including advertisements) is loaded, so ad impressions go up. But the user sees only what he wants to see, and since he doesn't see the ads, he doesn't have a compulsion to click on them. Bad enough that CTRs are low (usually below 1%), now they're going to go lower!

Website owners don't like low CTRs. It'll be harder for them to justify their advertising charges. For websites that use advertisements served by Google or Yahoo Overture, it also means smaller earnings. Google and Overture pay the website owner only when someone clicks on their ads. This goes back to the above problem of "the advertisements are cut out", i.e. fewer clicks, and therefore smaller earnings.

So, to summarise:
  1. end users - web clips good! No more advertisements!
  2. advertisers - web clips bad! No one sees my advertisements!
  3. website owners - web clips bad! No one clicks on the advertisements and I don't get paid!
What will Scott Adams (and website owners, in general) do? Well, there are a couple of options, but I thought of three:
  1. Product placement - highly unlikely, website owners like the "purity" of their content
  2. In-strip advertisements, e.g. between panels - are micro-ads understandable?
  3. Pay-per-use - no more free access, but will drive visitors away
Perhaps it's time for advertisers and website owners to have a paradigm shift in their thinking -- again. Once Microsoft implements web clips in Windows ("Redmond, start your photocopiers!"), it'll become more difficult to advertise on websites.

Here's my proposal: the (online) advertising industry needs to be able to track what people are seeing on a web page, and when they're seeing it. In the Dilbert web clip, it would be the moment when someone is reading the comic strip. There's probably a way to do so already. I just can't think of it off the top of my head.

From there, they can insert new kinds of advertising, e.g. an expandable banner that occupies the strip's area momentarily while the person is reading it. Ad impression levels are maintained, click-throughs could increase, and the website's value remains as it is, or improves.

Of course, these new ads will be irritating, but aren't all advertisements?

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1 comment:

Tym said...

I think another paradigm shift that will have to take place is that web users may have to consider paying for content. Not as much as they pay for it in pre-Web formats, perhaps --- but even if one isn't profiting from putting one's work online, at the very least one needs the basic server infrastructure, etc. to share the work online at all.

Personally I have no trouble paying for stuff online --- so long as the price is right :) But so many people balk at it sometimes that I'm like, er, you think electricity and computer chips is free one, is it?

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