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Pay Per Click Advertising and Your Next Media Buy

Ad dollars are shifting to the Internet in a major way. Goldman Sachs reports that the market could increase by 28 percent to $12.3 billion in 2005. While I don't think this will result in another bubble, it has resulted in every kind of "new and improved technology" coming out of the woodwork that promises to better target consumers.

Studies have shown that all this choice is not making media buyers' lives any easier. Rather it confuses them since each technology must be understood on its own terms and is hard to measure against competing claims of greater efficiency.

But one choice media buyers do understand, since it relates directly to their offline media buys, is contextual placement. It is not hard to take the idea of placing your furniture ad in the home furnishings editorial section of a magazine and then make certain that your only online ad is adjacent to content with an affinity with your product.

Add accountability or pay-per-click to the mix and you have the primary reason dollars are moving online.

Of all the contextual technologies, the ones generating the most buzz are pay per click search and contextual listings.

Recently, DoubleClick commissioned comScore Networks to use its panel of 1.5 million U.S. Internet consumers to provide insight into the usage of search prior to making a purchase. They found that a high volume of related search activity occurred at least 12 weeks in advance of making a purchase. The majority of pre-purchase search activity involved heavy usage of generic search terms like "DVDs" or "computer equipment" and not the traditionally expected usage of brand specific keywords.

Only up until the last two weeks of the buying process did potential buyers include merchants' brand names. The effectiveness of search marketing in all stages of the buying process is evident. What makes search and paid listing ads work so well is that they are automatically placed in the context of the user's declared interests.

How does the contextual targeting process work? Customers go through a five-stage decision-making process in any purchase:

Need Recognition: In the initial decision-making stage, the buyer recognizes a problem/need or could be responding to a marketing stimulus, such as having read an online article on Italy and becoming intrigued with the great travel deals surrounding the text. Pay per click ads placed alongside relevant site content have thus been found as an effective mechanism for attracting qualified buyers and helping them recognize their needs/wants.

Information Search: The customer, powered by his new need recognition, begins to explore the possible avenues for meeting his need. With the Internet becoming the first resource for research, the customer would likely click the related ad placed beside the online article, enter generic search terms on search engines, or visit broad content sites for more relevant information.

Evaluation of Alternatives: Through search engines, shopping engines and broad content sites, the potential customer refines his buying criteria that will ultimately affect the decision to purchase. The customer then narrows the field of choice to the best few. Especially where a purchase is "highly involving", the customer is likely to carry out extensive evaluation. Premium content sites are effective tributes in the process of alternative evaluations because they offer specific information that the consumers would need in an environment they trust.

Purchase: Finally, loaded with a driving need and adequate product knowledge, the customer finally takes action and purchases the item.

Broad and Special Interest Content sites play a critical role in reaching motivated buyers who demonstrate their interest just by showing up. A reader who is actively involved with quality content is a more qualified lead and is more likely to convert to a customer. All in all, contextual marketing represents a great opportunity to reach buyers at all potential buying stages.

According to analysts, the contextual advertising sector is expected to grow from $300 million today to $1.4 billion in 2008. What will drive this are more relevant consumer or B2B ads; the accountability and efficiency of online; and publishers who will want to maximize their real estate for contextual pay per click revenue.