3 Big Problems for Online Advertisers

Everybody knows that "figuring out" online advertising is an enormous challenge. Newspaper publishers miss the days when big ad images on dead trees in readers' hands could fund a real news staff with enough money left over to keep the coffee flowing and the donuts fresh. That's not the world we live in, alas. But why exactly are ad revenues so much lower online? Not surprisingly, Google has an answer.

The Google Public Policy Blog has an excellent take on the economics of news production. Here are three stats I took away from the post:

1) The Time Problem. "The average amount of time looking at online news is about 70 seconds a day, while the average amount of time spent reading the physical newspaper is about 25 minutes a day." That's a significant -- and surprising, right? -- point. Advertisers in actual newspapers expect readers will live with the publication for a while, which gives us plenty of time to come across their dazzling photos and catchy slogans and feel the urge to buy something. A 70-second impression is zip, and advertisers comparatively pay zip per impression.

2) The Audience Problem. "According to comScore, clicks from search engines account for 35-40% of traffic to major U.S. news sites." The nice thing about advertising on paper is that advertisers have a good idea of which readers buy the paper. It's usually a local audience of readers with a certain level of affluence and menu of interests. But if up to 40 percent of your traffic online is readers entering the site horizontally through Google and Bing, you've lost a sense of audience identity. Who are these readers? Where do they live? What do they like? Web analytics can begin to answer these questions. When the Internet opens local newspaper pages to the world, newspaper win eyeballs. But they're still working on making those eyeballs print money.

3) The News Problem. "The real money in search engine advertising is in the highly commercial verticals like Shopping, Health, and Travel." But those verticals don't just live on newspaper sites anymore. They've left the nest and made homes all over the Internet, at destinations like Edmunds (cars) Orbitz (travel) Epicurious (food). That leaves newspapers ... well, the news. The online newspaper and magazine community is moving toward verticals because if you can attract a bunch of regular readers to a page dedicated to, say, Business, you can begin to demonstrate to certain advertisers that you've created a logical destination for their product/service images.

What's my solution? I don't really have on yet. But in the meantime: stay on our site! Click over here to read about how tennis could have saved Eliot Spitzer. Or here to read about a possible Israeli attack on Iran. Or here to see the view from one reader's window in Barcelona. Then go visit our advertiser Nissan and buy a car (but only if you have the money.)

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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