Toolbars: Big Business

Search but you will not find toolbar adoption rates, but assuming just a few percentage points among internet users, and the numbers are huge. Toolbars are primary real estates for both advertisers and search companies: they are persistant across every Web site you visit: if you are a fortunate enough company to have a placement within a toolbar, you will receive hundreds, in some cases, billions, of impressions per year. In an effort to extend their market share, search companies not only release their own branded toolbars, but also negotiate co-branded deals with companies to be the default search engine for third-party toolbars.

Yahoo! announced today a deal with Hewlett Packard for a co-branded toolbar in which Yahoo will be "set as the default search engine in Microsoft's upcoming Internet Explorer 7 on HP consumer desktop and notebook PCs." Yahoo! will pay $$$ HP for the privilege of being the default search engine within the built-in toolbar that will come embedded within all HP computer units sold with I.E. Yahoo! makes money every time a users conducts a search using the toolbar and clicks on a sponsored link.

A big source of income for internet browsers and toolbars are from the money make by integrating third-party search services or advertisers into their browser bar. For example, Firefox users will notice the drop down menu in the search bar that includes companies such as Amazon and eBay. Every time a user does a search across Amazon or eBay and makes a purchase, Mozilla Corporation, a taxable company, makes money by sharing in the revenue generated. This is significant money considering the feature is built into every Mozilla browser.

Interactive Advertising Bureau Reports Continued Growth in Online Advertising

Interactive Advertising Bureau (IAB) released first half of 2006 internet ad revenues, and the numbers continue to rise. Below is a chart comparing year-over-year growth rates by ad channel:



Overally, internet advertising revenue grew 36.69% YoY, with revenue exceeding $4B for the first time in a single quarter in Q2. There are a confluence of factors at play here: consumers are spending more time on the internet, traditional media outlets no longer have the reach they once had, and the overall tivo effect of increased adoption of DVRs. Internet advertising also enables marketers to measure the impact of their ad dollars unimaginable in a few years ago which traditional media simply can't replicate. This is evident in where advertisers are spending their internet dollars:



Search has the biggest share of the pie underscoring the effectiveness of keyword bidding in driving qualifying traffic to online businesses. However, the largest percentage growths are in lead generation and classified ads, indicating that local advertising on the internet is quickly emerging. I suspect Craiglists is having a very good year, and we'll see more competition in online classifieds over the next year.

Although marketers are definitely spending the majority of their online ad dollars in direct response channels, the increased spend in display advertising suggests that marketers still value branded advertising in a medium perfect for direct response. This is good news for the major portals, especially for AOL who's betting their future on online advertising.

technorati tags: advertising, IAB

eBay Express: A Threat to Amazon?

If you're located in a major DMA and watch TV, no doubt you've been subjected to the media blitz by eBay promoting their new fixed fee shopping service, eBay Express. eBay first announced
eBay Express in April of this year, and have begun a broad marketing campaign in time for the peak holiday shopping season. eBay Express is a more direct challenge to Amazon that its Auction business, as its model takes a more traditional retail approach with fixed fee pricing and selection.

eBay Express is in part a defensive move by eBay to Amazon's success in growing its Marketplace business. After failing to compete with eBay with Amazon Auctions, Amazon has enjoyed success in attracting third party sellers to its platform, allowing merchants to offer their products on Amazon product pages. According to its Q2 2006 financial report, third party sales now represent 30% of all units sold at Amazon. That's huge. Amazon's courting of third party merchants is a direct threat to eBay, who relies on third party sellers for nearly ALL of its sales. There's an undeclared war going on for third party sellers, and eBay Express is just another battle front for that business.

Of course, merchants benefit no matter the outcome of the battle between Amazon and eBay: after all, its a battle for their business. eBay Express represents just another distribution point for their wares, and sellers can peddle on Amazon, eBay, or any other seller platform without penalty. Merchants will simply devote more of their time growing their business on the platform that generate the most sales, and profit, for them, and eBay and Amazon want to ensure they are the preferred platform. The question is, can eBay do to Amazon's retail business what Amazon could not do to eBay's auction business?

technorati tags: eBay, Amazon