The Internet may not feel like a kinder place these days. Spam, spyware, and viruses litter cyberspace. However, if you've noticed fewer pop-up ads or intrusive multimedia spots lately, you can probably thank contextual advertising.
Google (NASDAQ:GOOG) and Yahoo! (NASDAQ:YHOO) have done us all a navigational favor by popularizing contextual ads. Instead of Britney Spears getting struck in the face with a pie or a "Congratulations!" pitch blaring from your screen, you are now seeing text ads that are easier on the ears and eyes. More importantly, they are perfectly targeted, so the contextual messages are relevant.
Earlier this week, after his company had blown past Wall Street's second-quarter expectations, I was talking to CNET Networks (NASDAQ:CNET) CEO Shelby Bonnie about the contextual-ad trend. The company owns content-rich sites such as the tech hub at News.com and its namesake site that specializes in consumer-product reviews.
Traditional advertisers are flocking to CNET in greater numbers, but that doesn't mean the company should be giving short shrift to contextual advertising.
After a subscriber to our Rule Breakers newsletter service pointed out how frustrating it was to see an ad for a Sony VAIO laptop appear adjacent to a story on an improved inkjet product from Hewlett-Packard (NYSE:HPQ), where more appropriate printer and cartridge refill ads would have been more effective, I was able to duplicate the ad. As far as relevance goes, it's not completely off, though one would think that high-end printing and portable computing don't exactly go hand-in-hand. I ventured into other areas and found that the disconnect got only worse. A story about Motley Fool Stock Advisor recommendation TiVo (NASDAQ:TIVO) was saddled with an ad for Dice.com, a site for technology jobs. An article on the upcoming Xbox 360 was tagged with an ad for enterprise-class firewall systems.
Bonnie explained that the ads on News.com are not as contextually relevant as the ones that users find on other CNET sites such as Gamestop.com and CNET.com. That, in part, is because the company's inventory of ads continues to grow as sponsors flock to the online platform. That's great news for CNET in general, but one has to wonder whether CNET is leaving money on the table that way.
I ran the News.com articles through a Google AdSense preview tool, and those high-paying text ads made a lot more sense than the graphical ones that CNET was using. For instance, the HP article produced text ads for flash memory, HP photography, and digital printing products from Fuji.
When I asked Bonnie about the biggest challenge in increasing shareholder value, he alluded to educating investors and sponsors about the merits of online content over conventional media. He points to Gamespot.com. There, the typical user is an 18- to 34-year-old male who spends an average of 18 hours a week playing video games. When he isn't playing games, he's not watching TV or thumbing through the morning paper. He's online. He's at Gamespot. If a sponsor wants to reach him, CNET is the gateway to this lucrative demographic group.
That's why the company recently expanded its reach beyond its original techie stronghold by acquiring MP3.com in 2003 and launching TV.com earlier this year. Both sites have no problem streaming the fat files that consumers have grown to expect on the radio and television set, respectively. The difference here is that CNET has them on its turf and can dictate the marketable surroundings.
That's why CNET doesn't want to become the next major television network. Bonnie doesn't want to follow Napster (NASDAQ:NAPS) and RealNetworks (NASDAQ:RNWK) into offering music subscription services, either. He would much rather have CNET be the hub to all of those places, taking advantage of the medium as an omniscient overlord and letting the site visitors dictate the flow of attention.
The fact that CNET gets all this -- and gets it so well -- is why I'm surprised to see it not turning over more of its content-rich sites to a contextual-advertising network like Google. Bonnie explained that it has an in-house ad network for Gamespot, but it's hard to beat the simplicity of letting Google's gangly arms draw in the sponsors and its proven technology serve up the best-producing ads for any content space.
That's because, as befits its name, contextual advertising matters.
Related stories:
- Notes from my interview with Bonnie were published yesterday.
- CNET beat the Street earlier this week with a strong showing in its June quarter.
- I also spoke to Bonnie about his company back in April.
Longtime Fool contributor Rick Munarriz is a frequent visitor to CNET's network of sites, but he does not own shares in any of the companies in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
