Editor’s note: Russ McGuire is the online director of Business Reform Magazine. Each issue of Business Reform features practical advice on operating successfully in business while glorifying God.
For the next several weeks, I hope to tackle controversial decisions that today’s businesses are likely to face. Although, by their nature, these topics will be of high interest to general readers, my aim is to specifically approach the issues from the perspective of a businessman facing a difficult decision.
A couple of weeks ago, The Wall Street Journal announced new advertising capabilities within their wsj.com service. In short, the online service is paying attention to what you’re doing on their site, and is presenting ads to you that are most likely to get your attention. Many cried “foul” at this apparent violation of readers’ privacy.
This issue resonates with many because of the increasing aggressiveness of Internet advertising. Even ignoring the unscrupulous spam artists, legitimate and even high-class websites are increasingly selling obnoxious advertising methods such as pop-ups, pop-unders, interstitial ads (ones that appear before you get to the page you requested), video ads with sound, over-page superstitial ads (ones that appear on top of the web page you’re viewing), and undoubtedly new forms of “rich media” yet to be invented. If you use the Internet at all, I’m sure that you’ve been frustrated by obnoxious advertising.
This leads most businessmen with any integrity to assume that it is “bad” to have advertising on your website. And, given the additional valid concerns over privacy, it’s even worse to target ads at individual visitors by watching their actions. Right?
Not necessarily. If you are in business then you need to make business decisions. Business decisions generally are intended to make your business more successful, in other words, profitable. When making decisions about your website, as with anything else, you need to make those decisions based on short-term and long-term profitability.
It can be expensive to build and operate a quality website. The more sophisticated a website is, the more expensive it tends to be. As with any other investment, spending money on your website has to provide a reasonable return. If the value of the return from your web operations is likely to be small, then your investment in a website should be small. If you feel a need to make a major investment in your website, then you should similarly find ways to maximize the return from the website.
On the positive side, there are a number of ways that websites can provide a return on your investment:
- If you sell products through your website, the incremental revenues and margins from those sales are the most direct form of return available from a website investment.
- A second directly measurable form of return is in additional revenues through your website, including advertising revenues, commissions for referring visitors to other sites, and any other new revenue opportunities you may identify.
- A third potentially measurable form of return is in cost savings. If customers and partners can perform their own self-service functions through your website, and by doing so, reduce your operational costs, this can be a valuable form of return on your website investment. These “soft” savings are often difficult to quantify or even truly realize since they may imply headcount reductions that you aren’t really going to pursue.
- The final class of returns are impossible to quantify. They involve your positioning within your competitive market. Does your website enhance your brand? Does your website better position you against competitors for customers who are researching their options using the Internet? Is it a requirement for you to have a website so that you will be seriously considered for competitive opportunities? These are the critical issues that drive implementation of most business websites. It’s virtually impossible to quantify the value of these factors.
Unfortunately, not all websites create positive value. A poorly designed and implemented website can do more damage than good. Consider these risks:
- Does your website frustrate visitors?
- Does the information on your website present your company as an inferior provider, especially compared to your competitors’ sites?
- Is information on your site out-of-date?
- Is the quality of your website inconsistent with the quality of your core product or service?
- Do you have the processes in place to effectively and efficiently follow-through on customer transactions (sales or customer support/service) through your website? If not, you run the risk of seriously damaging irreplaceable customer relationships.
- Does your website damage your brand?
With this as a general framework, there’s really only a very narrow definition of a site that will benefit from advertising:
- A website that fits into a category where advertising is well accepted and therefore visitors won’t be frustrated by advertising. (e.g. online media, portals, and information services)
- A website with enough traffic to be valued by advertisers.
- A website with a well defined target audience so that advertisers can evaluate and appropriately value the access to that audience.
If your website doesn’t match category 1 above, then you’re very likely to offend your visitors with advertising, damaging your brand, and positioning yourself poorly relative to your competitors. Although Microsoft has tons of visitors to their corporate website, it would be inappropriate for Microsoft to sell ad space on this website. However, Microsoft is very successful selling advertising on the MSN portal, as well as on their online media destinations such as MSNBC.
On the other hand, if your website doesn’t match categories 2 and 3 above, then your efforts to sell advertising on your site will have minimal returns – you simply won’t generate much revenue.
However, if you have a relatively high-traffic online media service or information gateway, then advertising may be appropriate. Making the most of the opportunity requires careful planning and execution. Some of the issues to consider include:
- Should you spend your time chasing advertisers, or should you outsource?
- What forms of advertising should you accept?
- How should you price your advertising?
If you are already selling advertising (e.g. for a print publication) and you already have relationships with the most likely advertisers to your audience, and you’re comfortable extending those discussions into the Internet space, then go for it. Otherwise, it would probably be best to let someone else take the lead. Unless you are a huge destination site (in which case, you probably aren’t reading this article), your advertising revenue opportunity probably doesn’t justify hiring a full-time employee to chase advertising customers for your site. You’re best off trying to find the person or firm who handles the advertising for sites that feature the kinds of advertisers that are likely to be attracted to your audience, and see if they will take on your portfolio. This approach won’t be cheap in terms of the commissions you’ll pay, but your net revenue will likely build higher and faster than you could accomplish yourself, and without all of the investment of your personal time to achieve it.
If you outsource advertising sales, the decisions about the types of ads and the pricing gets much simpler – lean on the wise counsel of those already active in this market. However, if you’re out there doing it yourself, you’ll probably need to have lots of discussions with your potential advertisers – as with any customer relationship, you need to understand their needs and desires, as well as their willingness to pay. Keep in mind that, what the advertiser wants and what your audience wants are often at odds. You need to balance the value of the advertising revenue against any potential cost of offending your site visitors.
Thankfully, most of us don’t need to worry ourselves with hard decisions concerning high-tech offensives such as over-page superstitials or other potentially obnoxious forms of advertising. The cost of producing those ads is so great that they really only make sense for the most heavily-trafficked sites on the web.
As for privacy, I believe most concerns are overstated.
Today, there is a very real risk of identity theft. Protecting private information that can be used for identity theft and additional crimes that follow from identify theft is critical. Whenever practical, you should avoid keeping any information on your webserver that can be used in these types of crimes – including social security numbers, credit card numbers, and perhaps addresses and phone numbers. None of these pieces of information have anything to do with internet advertising.
If you have come to my site, and if I have made the right business decision to have advertising on my site, then we each may have additional decisions. You can decide to leave my site because you don’t like advertising – and that’s fine. I can decide to either randomly put any ad in front of you, or to try to do my best to put an ad in front of you that is actually aligned with your interests. Which would you rather see? An ad that is totally unrelated to your interests (and perhaps even offends you by being so out of alignment with your preferences), or one that is for products and services in which you have consistently shown an interest? I’m guessing the later.
Now, don’t get me wrong. There are lots of improper things I could theoretically do with information that I learn from watching you move around my site. I may have all that I need to spam you with unsolicited e-mail ads based on your activities. I may have enough valuable information about your preferences to sell that info to others, along with either your online (e-mail) or offline (address, phone number) contact information. Or the information could become available to humans either inside my company or outside my company (but – what good is a person going to do with a list of articles that you’ve read?). Any of these actions would be highly inappropriate, unethical, and in some cases probably illegal and should not be condoned for any reason.
So, if you’ve made the carefully considered and ethical decision that Internet advertising makes sense for your website, it never hurts to take lessons from the best. Take a look at the winners in the Web Marketing Association’s Internet Advertising Competition. (I recommend searching on “all levels.”) I’m sure these will give you some interesting ideas!
Russ McGuire is Online Director for Business Reform. Prior to joining Business
Reform, Mr. McGuire spent over twenty years in technology industries, performing various roles from writing mission critical software for the nuclear power and defense industries to developing core business strategies in the telecom industry. Mr. McGuire is currently focused on helping businesspeople apply God’s eternal truths to their real-world business challenges through Business Reform’s online services. He can be reached at [email protected].
