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Senior Thesis

Online Advertising Could advertising on the internet really be free?

Steve Vogt 11/12/2009


Introduction With the creation of the internet came an extraordinary opportunity for businesses of all kinds. This opportunity allowed businesses to advertise in the “virtual world” known as the internet. Advertising online became an affordable alternative compared to other forms of media such as television, print, and radio. As advertising on the internet evolved, so did communication. A revolutionary infrastructure was created known as Internet Relay Chat (IRC) that allowed advertising and communication to merge. Of the various methods of online advertising, IRC offers the advantages of reaching millions of viewers, communicating instantly with potential customers, and costing the advertiser nothing.

History of the Internet and Advertising In 1973, the U.S. Defense Advanced Research Projects Agency (DARPA) investigated technologies with the objective of allowing various networks nationwide to connect to multiple servers at the same time. This was called the “Inter netting project,” which today is commonly 1

referred to as the Internet.

As the internet developed, so did advertising. Banner ads soon lost popularity to popup ads, advertisements that open separate web browsing windows displaying full page advertisements. Popup ads quickly became the most popular form of internet advertising, and it was not uncommon for people to see multiple popups at one Web site. As technology improved, popup ads led to floating ads, which took advantage of the new JavaScript language and allowed

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James W. Cortada, 21st Century Business: Managing and Working in the New Digital Economy (Upper Saddle River: Prentice-Hall, Inc., 2001), 4.

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an image to scroll across a web browser window rather than popping up randomly on a user’s screen. Pay Per Click (PPC) campaigns contributed another dominant and effective form of online advertising in the early 2000s. PPCs offered a different approach and the opportunity to have a message spread across the internet for a nominal fee. IRC offers its users the ability to advertise and communicate free of charge to millions of people in real time.

Banner Advertising Benefits Banner ads were the first type of advertising used on the internet. The idea was simple: advertisers created a text or image ad and placed it anywhere on a Web site. At first, banner ads were cheap solutions to advertising that yielded high traffic. As more companies advertised on frequently visited Web sites, the price of banner advertising increased. The prices varied based on the page placement, where the ad appears on a Web page. It was no longer preferable to advertise on the sides of a page, increasing the popularity of banner ads on the top and bottom. Most advertisers wanted to be as close to the top of the page, and as centered, as possible to insure a greater visibility rate. An example of how effective banner advertising can be can be can be illustrated by a graph below of the company NationVoice.2

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Nationvoice.com sells an online voice communication server, Ventrilo. Ventrilo can be downloaded at Ventrilo.com. The software that Ventrilo uses allows people to connect to a voice server, no matter where they are in the world.

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FIGURE 1

Nationvoice.com started a banner ad campaign on a popular gaming news center Web site, GotFrag.3 Its ad was placed on the upper right hand side of the Web page costing $15,000 for four months. NationVoice.com posted an advertisement on GotFrag’s Web site from August through November. NationVoice.com saw a dramatic increase in web traffic as a result of using banner ads on other Web sites. The banner ads did not guarantee sales though.

Problems The problems with banner ads were a result of the simplicity and success of the concept. When Web sites began to place more ads than content on their pages, the ads became

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Gotfrag.com is one of the world highest visited Web site for gaming news. They provide daily posts, articles, and features on the latest news in online gaming.

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overwhelming, which eliminated the ability for a site to charge more for prime placement. Advertisers were now having their ads hidden in the midst of other ads. Another problem with banner ads is the price for different placement on highly targeted Web sites. An example of how a price can be broken down can be found in the chart below:

The orange boxes are the available spaces for advertisements to be placed on the Web page. There are no set dimensions or specific location for banner advertisements nor a requirement for the period of time an advertisement has to stay on a Web site. These terms and conditions are up to the owner of a Web site and the advertiser. Physically, the higher up and larger an advertisement is on a page, the more it costs. The most inexpensive advertisement is the one in

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the lower left hand corner for $300. The $500 ad at the bottom of the page is preferred by most advertisers because of its width and central location; this is also a prime spot because all of the contact information for the company is put along the bottom of a site. Advertisers are still not guaranteed sales by paying for better placement or larger sizes, but the probability that people will click on their advertisement increases with a well-placed banner ad.

Pay Per Click Campaigns A newer form of online advertising is emerging on the web that offers advertisers a convenient way to advertise at a low cost to the publisher. PPCs are a type of advertising where an ad can be shown at no cost to the publisher until a person clicks on the ad. This originally appeared to be where all advertising would end up, but quickly people found problems within this system.

Benefits PPC allows advertisers to create an advertisement placed across the internet. The advertisements are randomly selected based on keyword technology that detects similar words in an advertisement to the content on any given Web site. This type of advertising is relatively inexpensive because an advertiser is only charged once people click on the advertisement. This allows more people to see the ad at no additional cost to the advertiser.

Problems The first major problem with PPCs was the restriction basis of the advertisement. A publisher first had to create a strand of text with a limited length (usually less than 25 characters) with the hope that it would be creative enough to draw more traffic to the publisher’s Web site. 6 Vogt


Because of the shortened messages, potential consumers were confused, which resulted in fewer sales. This confusion resulted in additional clicks because consumers wanted to know more, ultimately costing the company more money. The bottom line was that advertisers saw a wasted opportunity in their ad spending on what could have developed into potential customers. The second problem with PPC campaigns is that the service allows anyone in the world to sign up. This means anyone can place a random string of ads on a Web site, regardless of the context of the Web site. An advantage for individuals or companies hosting PPC ads on their Web sites is the payment they receive every time someone clicks on the ad. This results in millions of fraudulent clicks across the internet and millions of publishers’ dollars wasted. As keyword technology improved, advertisements were visible in areas relevant to their messages; however, one problem still arose from this situation. For example, the owner of a Web site, selling widgets, would be advertising for other companies selling widgets too. This was a real mess to publishers and advertisers of Web sites using these ad campaigns. If a person went to Web site XYZ.com for widgets and then saw an advertisement on that site for company ZYX selling widgets for a lower price, XYZ would lose the sale if a person followed the advertisement for a lower price. Company XYZ was paid for hosting the ad, but only pennies rather than the full amount for the prospected sale of its widgets. PPC campaigns are a great way for users not selling anything on a Web site to gain additional income, but for the majority of Web sites this does not apply. The last thing an advertiser wants to have is to have wasted money on an advertising campaign that only increased the number of hits on his or her Web site due to curiosity of an ad in itself; or clicks from a 7 Vogt


certain group of people who are just trying to get the owner of a particular Web site some easy money. The idea behind the PPC was creative, but in the end, it was a risky venture that did not yield a high profit.

Popup Ads Popup ads had an initial appeal to marketers because of their intrusion value. The ad would pop up, typically covering the entire page, forcing the viewer to see what the ad had to offer.

Benefits Popup advertisements offer an advertiser the ability to instantly flash an ad at a low price. This seems to be a breakthrough from traditional banner advertisements allotting companies certain sections of a Web site to place an ad specified by dimensions. A popup ad can be as big or small as the advertiser wants and can come out at any time. It is typical for a popup ad to appear within the first few seconds of viewing a Web site, but there were some ads that would wait until a viewer was on a site for 3-5 minutes before flashing their messages.

Problems Millions of people were instantly opposed to the ceaseless popups in just one day’s worth of online surfing. Something had to be done. The solution, for the general public, was the 4

popup blocker. Opera was the first web browser of its kind to have a built in popup filter. It allowed users to set preferences of how often they view popups. Unfortunately, Opera was not a commonly used web browser, though it was the only browser to have this advanced technology.

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Opera.com is a Web site that offers an alternative web browser.

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The majority of people surfing the web used Internet Explorer, created by Microsoft. It took Microsoft until late 2004 to develop a built in popup blocker for its web browser. By this time, most people sought out a solution by downloading third party software that claimed to block all popups. This software, for the most part, did its job. By the year 2005 it appeared popup ads were finally being tamed with the invention of popup blocking code technology. The users of the web took back their privacy and put a stop to the annoying intrusions of popup ads. Today popup blockers are easy to obtain online and in retail stores, whether it is built into a web browser or through a third party software engine. Advertisers were not happy with this because having the ability to instantly flash their message to thousands, if not millions of viewers seemed too good to pass up, so with a new thought process, floating ads were then created.

Floating Ads Floating ads are a string of advertisements, often in the form of images that scroll across a page while viewers visit a site, and thus exposes them to a rolling series of ads for a company or product. This development was introduced to the internet in early 2006 by Vibrant Media. The company understood the opportunity it presented to online advertisers and charged nearly 20 percent more in fees for floating advertisements than it had in the past for popup ad campaigns. Floating ads seemed to be a successful alternative to the dying venture of popup ads, because unlike popup ads, there was no software to block this new advertising code. Marketers now had a new way to get their messages across to prospective viewers. In September 2008, Opera web browser finally released an update that blocked floating ads. The story for floating ads follows that of popup advertisements. By the end of 2008, nearly

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every third party software program had the ability to block floating advertisements in addition to popup advertisements. These forms of online advertising are no longer as effective and are currently losing favor with advertisers and marketers to more effective forms of online advertising.

Cost of Online Advertising Advertisers often do not get their money’s worth out of online ad campaigns. In the media service company ZenithOptimedia’s research, it was calculated that, “Americans spent $54.4 billion on online advertising in 2008. We estimate that in the year 2009, online advertising will grow over 9%.”5 This study shows, based on the data available, that online advertising continues to increase in overall cost and by the number of advertisers. An example of how much some Web sites charge for advertising can be found in the table below.

Web site

Cost Per Click

MySpace

$25

Wall Street Journal

$90

YouTube

$150

New York Times

$110

This chart shows that each click generated by a visitor on one of these Web sites will cost the advertiser a specific dollar amount per click. The duration of the ad campaign that took place is 5

Stan J. Liebowitz, Re-Thinking the Network Economy: The True Forces That Drive the Digital Marketplace (New York: AMACOM, 2002) 38.

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unknown, but the costs of hits to an advertiser’s Web site could quickly jump from affordable to astronomical. Doubleclick, founded by Google.com, is one of the largest advertising Web sites in the world. 6 It is charging advertisers an average of $60 per 1000 page impressions for a banner advertisement. 7 The math behind page impressions is as follows: Number of impressions / Cost per impression = Cost per viewer of the ad .

Looking at this on a larger scale, the Wall Street Journal has a world web ranking of 326 by Alexa.8 The Wall Street Journal averages more than 1.2 percent of everyday web browsing on the entire planet. The costs of advertising on websites of this size can be costly and does not guarantee a higher rate of sales, just because the advertising price is higher than normal.

Introduction to Internet Relay Chat IRC is a tool that connects people to thousands of servers allowing them to chat on channels with many others rather than conventional one-on-one chat. IRC was developed in 1988 by Jarkko Oikarinen to improve the current forms of communication between users on the 9

internet. To break IRC down, one must first look at the network structure of IRC. When people want to connect to this network, they must have a working internet connection from a device with web browsing capabilities. Users must then download a program that is able to interpret the IRC code and replicate it to text communication on the internet. One popular program for connecting to an IRC network is mIRC, found at http://mirc.com. Once a person 6

Doubleclick.net is an advertising outlet for companies to publish advertisements. Page Impressions count the number of views of a page. This includes unique hits, hits from page refreshing, and hotlinks from other Web sites. 8 Alexa.com ranks pages based on popularity. 9 Web site 7

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has downloaded and installed the needed software, he or she will then proceed to connecting to a server. There are currently over 1500 servers located worldwide. An easy way to look at this would be saying a server is like a country. Anyone in the world can connect to this country at any time. From here a person must then connect to a desired channel. A channel could be looked at as a state within that particular country. Once a person is connected to the channel, he or she is able to communicate to everyone located within that channel. Within each channel on each server holds a set of rules dictated by the channel and server operators. When a user connects to a server, there are a set of rules that the owners of the server puts out which can typically be found on the servers Web site. The worst thing that can happen is a banning from the server if rules are broken, a little less worry sum than being thrown in jail. Digging deeper, there is also a set of channel rules. Each channel is able to create their own rules in addition to all the server rules. One could look at these rules like laws in our society and the creators of these rules are similar to elected officials who just happen to monitor a particular server and or channel. The communication within these channels can range from anything. Right now there are discussions going on about political issues, where to obtain bootlegged software, sport related chat, how to “fill in the blank� chat, video game related chat, and much more. There is one thing that all these channels have in common, and that is the ability to advertise anything a person desires. In fact, there are even channels made off of advertising in IRC that turn into business and currently profit more than one might expect.

Advertising on IRC / Example 12 Vogt


In 2008, an IRC based company on the GameSurge network created a channel titled “#nationvoice.� NationVoice’s CEO brought in over $54,000 this past year.

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The company

formed in early 2003 over this network and since then has grown every year since its founding in early 2003. It is currently advertising in more than 350 channels free of charge. In the world of IRC, advertising anything is allowed as long as it is not breaking the rules set by a particular server and or channel. One row of text has the capacity to be displayed to millions of computers all within a second. Once an advertisement has been delivered, people who find the advertisement intriguing can instantly contact the advertisers and chat with them, join the channel that was posted in the advertisement, or even visit the Web site posted within the advertisement. A lot of advertisers will also post a channel name along with a Web site address. This generates a higher connection between an advertiser and a potential customer on IRC. The ability to send messages across multiple channels is buried within the code of IRC. The language used in IRC can be anything in the world as if a person was typing an email; however, there is computer language that needs to be understood to send a mass message over IRC. This principle is the same as putting together a Web site or coding a computer program. The following is an example of the syntax used to send multiple messages over IRC:

/amsg This is a testing of the advertising capability over IRC to multiple channels

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Game Surge can be found at gamesurge.net. NationVoice can be found at nationvoice.com. Earnings for the CEO was reported over a conversation using their Ventrilo server.

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Breaking it down, the “/” is an indication in IRC language that informs the server that a command is coming. Following the backslash is the string “amsg”.

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This sends a command

telling the server to send a message to all channels the sender is currently in. Finally, the text after “amsg” is the message or content of the advertisement. Logically, spammers would flood the channels with advertisement or unrelated content; however, like any computer language, people can code custom scripts to fit a particular need. In this case, established rules and channel operators prevent people from spamming. GameSurge, the server network that NationVoice.com is currently using, has an average of 20,000 people connecting to it every day, and there are over 16,000 channels on this network right now. Advertising to 20,000 people in most mediums comes at a hefty price—but not IRC. Again, advertising over IRC channels is free, and is as simple as typing the syntax “/amsg”. All a person needs to obtain is an understanding of how the IRC network operates and learn how to connect to the channels with the greatest number of people. Once someone connects to a server, he or she simply has to type “/list.” This pulls up a window showing a list of all the channels complete with the exact number of people in that channel. This trims down the number of channels an advertiser joins by targeting only the largest ones.

Creating Channels If a company was looking to advertise on IRC, it would first create a channel in the network. Creating channels is a simple task, and as long as a channel is not taken by another

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A string is a grouping of letter characters to forum a command. Amsg stands for: All Channels Message.

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user, all channel names are fair game.12 The benefit of marketing a channel is so that a collective group of individuals can all be in the same place. This allows discussions to take place about a product or an idea. It also opens the door for users to post questions in the channel about anything and have anyone in that channel answer the question. Channel Q&A is instantaneous and allows anyone in the channel to contribute to discussions.

Benefits of IRC The potential benefits of using IRC are so great that it can be used as the primary advertising medium of a company. The ability to offer free advertising to millions of people at any given point in time is unique to IRC. It seems that companies invested in IRC have tapped into something truly revolutionary. IRC allows a single user to send a message that can be seen by millions of people at no cost to that user; no other medium in the world allows this communication. To add to the benefits, all users who see the advertisements can then instantly go to the Web site of the advertiser, or the channel, for instant information in the advertisement. No more waiting for e-mails that somehow get lost in cyberspace or telephone customer support by robot voices. IRC provides companies and potential customers that share similar interests with a safe environment, complete with rules and regulations. And the channel can be set up to meet the needs of its users.

Conclusion

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It is customary for each server to have a channel devoted to registering channels and helping its users with problems and questions. This channel is “#help.” Once a company joins “#help” and speaks to an operator to register a channel, it is free instant advertising to anyone in the world.

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Various forms of online advertising such as popup ads, floating ads, PPC campaigns, and banner ads, allow advertisers to pay money for page impressions, user-generated clicks, or appearances in front of randomly selected viewers. Though these methods of advertising can be effective, they also come with higher risks and greater costs for a rate of return. IRC is the only form of online advertising that is capable of offering advertisers free ads to millions of prospective customers. The concept of chatting, posting an advertisement, and instantly discussing it, leading to a sale, is a benefit no other form of online advertising can offer.

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Bibliography Adams, Richard. www.advertising. Series consultant Alastair Campbell. New York: WatsonGuptill Publications, 2003. Alexa: The Web Information Company. http://www.alexa.com/. Clifford, Staphanie. “Online Rally May Sidestep Newspapers.” New York Times, October 25, 2009, http://tinyurl.com/yjsqgvr. Cortada, James W. 21st Century Business: Managing and Working in the New Digital Economy. Upper Saddle River: Prentice-Hall, Inc., 2001. Gao, Yuan, ed. Web Systems Design and Online Consumer Behavior. Hershey: Idea Group Inc., 2005. Kunz, Ben. “A Pricing Revolution Looms in Online Advertising.” Business Week, April 6, 2009, http://www.businessweek.com/technology/content/apr2009/tc2009045_367596.htm. Leebaert, Derek, ed. The Future of the Electronic Marketplace. Cambridge: The MIT Press, 1998. Liebowitz, Stan J. Re-Thinking the Network Economy: The True Forces That Drive the Digital Marketplace. New York: AMACOM, 2002.

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Senior Thesis Project