We’re constantly hard at work here at Click Forensics to continuously improve our ability to accurately predict overall traffic quality for our clients.  And, every now and then, we’re able to bundle a number of these enhancements into the tangible release.  We did just that last week; announcing an upgraded version of our Yahoo! TQ Forecast feature.  We’ve been testing these features with a handful of clients, with strong results so far – namely, much better predictive accuracy so that clients can be sure they’re sending high quality/high paying traffic into Yahoo.  And, we’re excited to now be rolling this out to all our clients.  Specific features include:

• YTQ Forecast Report – provides a summary of the likely Yahoo! TQ scores particular traffic sources will receive when they’re sent to Yahoo!;
• Dynamic Adjustments - continuously monitors and adjusts to changes in the YTQ score rankings so that clients can appropriately tune and filter traffic sources;
• Preemptive Traffic Source Blocking – enables publishers and ad networks to quickly identify and block certain online advertising traffic sources that are likely to deliver low Yahoo! TQ scores; and
• Enhanced Botnet Detection – delivers better detection of non-human clicks, both malicious and benign, while serving as an early warning system for advanced sources of fraud.

We also got some nice coverage in AdExchanger about the problems some of our CPC and performance-based ad network clients face and how these new enhancement will help solve these challenges.

Q1 2009 internet media revenues were announced by the IAB today, with the industry experiencing an overall drop of 5.5% from Q1 last year.   Given all the bad economic news over the first three months of 2009, along with poor results announced by internet stalwarts Google, Yahoo, AOL and MSN, it’s not much of a surprise.  However, it is the first time since 2002 that the IAB reported number experienced a year-over-year decline.

There is some solace that online media results fell at a much lower rate than offline:  newspaper ad revenue plummeted 28% and radio revenues sunk over 24% – both some of the YOY worst declines in our lifetime.  TV revenues are also sure to fall, as soon as TNS reports Q1 results later this month.  That said, it’s never good to see our industry experience a YOY decline, no matter how small.  And, frankly, it was only a few months ago where I predicted that online media would show (much slower) YOY growth.

What’s changed was the depth of the economic crisis and the swift response by marketers to tighten up their spend.  Combine this with the free-fall in traditionally strong categories (finance, automotive to name a couple), and its surprising overall online media revenue hasn’t fallen more severely.   And, frankly, I don’t think the decline is over.  Based on conversations I’ve had over the last few months with folks whose opinions I respect, it seems like Display Media may have bottomed out, but we may see a continued decline in CPC spend.  This is being driven mainly by cuts in spending on second and third tier providers, as advertisers concentrate their spend with perceived higher quality networks and providers.

In an environment of shrinking budgets and more demanding buyers, increased transparency and tangible ROI are becoming requirements not “nice to haves.”  Those networks that actively manage and cull their traffic sources to ensure high quality traffic will continue to win out as advertisers increase demand that they “get what they pay for.”

As our overall economy continues to struggle, it’s clear that buyers are in the enviable Catbird Seat.  Looking to buy a new car or a new house (and you’ve got financing set up)?  Then, you can pretty much name your price and terms.   Sellers will literally fall all over themselves to make you an offer you can’t refuse…

Sound familiar?

It should, because this is also playing out in the online media space right now.  While overall online media spend continues to grow (albeit tepidly), supply is so outstripping demand that many online media buyers and SEM marketers are able to flex their muscles and negotiate better and better terms.  This helps explain plummeting CPMs and, yes, even declining CPCs.

But, this newfound advantage is also reflecting itself in the types of sites and networks advertisers are choosing to buy.  Increasingly, we’re hearing from our advertising and agency clients that they are starting to get picky about buying media only on those sites and networks that have open, transparent policies.  For ad networks, that means more clarity on what type of sites they’re running an advertiser’s ads on.  For search and contextual CPC players, it means increased visibility into overall results and more flexibility within the bidding platform to allow advertisers to find and opt-out of poorly performing segments.  Net/net: it’s about advertisers wanting more assurances and tangible capabilities and reporting to ensure they only get the media they specifically want.

Ad networks and CPC networks take note: I don’t believe this fight to quality is a temporary occurrence.  Even after our economy turns around, restarting sustainable growth in online media will be predicated on stealing share from other forms of offline media.  These new entrants will demand the level of transparency they’ve received in the offline world as a precursor to online media migration.

The other day I read a great story titled “Google Devalues Everything it Touches” by Tom Foremski of the SiliconValleyWatcher summarizing a recent Charlie Rose interview on the future of journalism with the top editors from Time magazine, The Wall Street Journal and The New York Daily News.

In his article, Foremski highlights some of the more interesting things the editors had to say about the quality of ads Google delivers and the impact it has on the journalism world.

One point highlighted by Foremski was made by Robert Thomson, Managing Editor of The Wall Street Journal. Thomson mentions that that Google doesn’t distinguish between the quality of the content for the ads it serves up. But rather [Google] is concerned with quantity rather than quality. Co-panelist Walter Isaacson of Time seemed to agree when he said:

“Also, what Google does is it allows ads to be spread all over the Web.

You can go to Google ad servers and put ads on any site there is.”

The quality of the content on web sites where Pay Per Click ads are served is very important to the companies who pay for the ads. It’s no different from the print world where companies pay a lot more to run advertising campaigns in The Wall Street Journal than they do to run them in a weekly local tabloid. It’s not only the reach or size of the audience, but also the quality of the stories published and the audience that they atttract.

The same should be true in the online advertising world but for now it doesn’t seem that advertisers are getting much help from the search engines to make sure it happens.

It’s reaffirming to see the online media industry buck some of the recent “chicken little” pronouncements of the last few months.  While the industry isn’t out of the woods yet, it’s clear that online media in aggregate continues to perform better than its offline brethren, even as the overall global economy goes through the worst contraction of our collective lifetime.

Some recent data points:

• Google and Yahoo’s recent Q4 earnings announcements that exceeded beaten down expectations.
• A recent Ad Age post that highlighted the divergent job trends in Q4, with online media agency positions holding their own/showing slight growth against significant job loses/declines in the offline media space.
• Rumors that Q1 online media results may not be as bad as initially feared, and may actually show growth over 2008.
• Continued importance of ad networks, with more and more available inventory being filled through this aggregation channel.

While this continued, albeit slower growth is generally good news, it is coming at a price…

Even before our recent economic uncertainties, the overall online media industry was seeing an explosion of web traffic growth that has been far outpacing the migration of media dollars online.  The result has been simple supply and demand economics – overall CPMs are plummeting (see Pubmatic’s recent trend data here) as the “glut” of online media inventory creates a buyer’s market.  And, much of this web traffic growth is coming from new sources that are less desirable from a media buying standpoint – social networking sites, social media sites, etc. – that exacerbates the challenge.

So, what’s the solution?

In the near term, you’ll just see more and more media sold via performance based options – CPC and CPA.  This will allow web site publishers and traffic providers to monetize their inventory as best as possible.

In the longer term, you’ll see the development of more targeting technology and options so as to create higher value “buckets” of inventory from this vast sea of growing untargeted, “run of network” inventory.  Advances and improvements in contextual and behavioral targeting are already occurring.  And, you’re starting to see some interesting new techniques – from social media targeting (to identify mavens and influencers) and location-aware targeting (so you could be shown a Starbucks coupon/ad while you surf via WiFi at a local Starbucks) to improvements in predictive modeling/collaborative filtering.   And, you’re also seeing the rise of ad exchanges as a mechanism for aggregating these new audiences and streamlining the bidding process for bringing targeted online media buyers and sellers together.

The last piece of the puzzle, then, is to convince advertisers to increase their share of overall media budgets that they allocate online.  But, these new targeting and bid technologies alone won’t be enough to accomplish this.  It will also be important to increase advertisers’ confidence that they’re getting what they pay for through increased transparency on exactly what the advertiser is buying.

At Click Forensics, we believe that the more forward-looking ad networks will realize that transparency can be a core differentiator.  And, we’re starting to work with many of them to provide assurance to their advertisers thru 3rd party authentication and scoring that validates overall traffic quality.  This isn’t just filtering out invalid and fraudulent traffic, but using a comprehensive traffic quality management solution to actively manage and work with an ad network’s various traffic sources and partners to ensure that only qualified traffic is delivered upstream to their advertisers.  The net result is better results for advertisers, which increases overall retention and follow on media buys.  And, frankly, that’s the key to increasing overall online media allocation!