Information Is the Enemy of Online Advertising

So, nobody knows how to measure an online audience:

The Internet has three different measurement firms using different systems to gain Web data on online audiences. According to the Los Angeles Times, when one service overhauled its methodology, Hulu's viewership "shriveled to 24 million in June, from 43.5 million in May." With ComScore, Nielsen, and Quantcast all taking different angles, advertisers are having trouble gauging a site's viewership, since "the same site's traffic can look emaciated or bulging."

That's a problem, since online advertisers are perched on a $25 billion pot of money they want to spend on the Web. Many advertisers say the most important figure is "monthly uniques," which is the number of people -- or IP addresses -- that visit a site. But ad dollars are also pegged to page views, or the total number of pages loaded on all those addresses.

The metrics of the Web are a double-edged sword. On the one hand, page views and monthly uniques give advertisers an exact readership figure that magazines don't have. For example, I subscribe to New York magazine, but I share it with roommates, friends, and colleagues. The Audit Bureau for Circulations counts this as one magazine, but individual articles in an issue can get up to 10 "page views" when I share with acquaintances. Here, logistics and measurement favor the Web.

On the other hand, online metrics also tell advertisers want we aren't reading: the advertisements. I don't spend much time looking at ads in magazines (or on TV), but unless New York has little cameras embedded in the feature well, there's no way for companies to know how much I'm ignoring them. On the web, you can't hide your eyes -- or at least your mouse. Advertisers can measure time spent on a page, "click-throughs" on their banner ads, and the depth of visits from online news readers who go spelunking around the ad site.

In short: metrics for online ads tell companies exactly how much you're ignoring them. They don't like it, and so information makes online ads less valuable. The solution to meager ad rates is partly innovation on the edit/ad side, but maybe it's also advertisement companies reevaluating exactly why they should pay so much more for a print or TV than for a Web spot that allows readers to immediately, and measurably, engage with the ad material.

Presented by

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

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