Marketing Pilgrim

By Greg Howlett.

A recent study from BlueLithium suggests that online retailers can find advertising bargains on Web 2.0 sites that feature user generated content.  While this initially seems like good news, there are additional factors that retailers should consider before jumping on the Web 2.0 bandwagon.

The study compared the cost per conversion between three different groups of sites—user generated content (UGC) sites, non-user generated content (non-UGC) sites, and highly authoritative editorial sites.  Both the non-UGC and authoritative sites had significantly higher click through rates and conversion rates than the UGC sites.  However, when factoring in the ad cost, the UGC sites had a lower cost per click and cost per conversion.

So how is this information relevant to your business?  Just as importantly, what information is not found in this study that you need to know before making advertising decisions about Web 2.0 advertising?  Here are a few thoughts.

1. Trust is an issue on UGC sites.  Not surprisingly, the authoritative sites generated the highest click through and conversion rates, and were followed by the non-UGC sites.  UGC sites were way behind in these two areas.  This is a clear signal that visitors do not hold UGC sites at the same level of trust as other sites.
2. UGC sites will only remain an advertising bargain as long as their ad rates are lower than rates on non-UGC sites.  Today, the vast majority of UGC sites have few options for selling advertising, but in the future, it is feasible that even small blogs will have the ability to get much higher ad rates.  If that happens, today’s opportunity may disappear.
3. This study gives no insight on the “social buzz” phenomenon.  Viral marketing, paying for user generated content, and similar strategies were not addressed.  However, most experts believe that these strategies are where the real advertising opportunities exist with Web 2.0 sites.
4. The easiest way to advertise on UGC sites is AdWords.  However, few advertisers seem to be able to make this work.  In fact, since Google started allowing advertisers to bid differently for AdSense websites, those bids are dropped drastically and many advertisers refuse to bid for placement on those sites at all.  Going directly to UGC sites to buy advertising does result in lower ad rates.  However, because UGC sites tend to be low traffic, putting together a large campaign is normally too time-intensive to be feasible.

If you choose to advertise on UGC sites with traditional advertising units such as banners or text ads, make sure you are getting as good a deal as you think you are.  It is quite possible that cheap ad rates are being offset by a low click through rate or conversion rate.  As with all advertising, good reporting is critical to identifying problems.

On the other hand, using UGC sites to create social buzz for your product line could be very cost effective and could even lead to dramatic results.  In my opinion, this is the better Web 2.0 alternative for most retailers.

Having launched two multi-million dollar online companies, Greg Howlett has been working in the trenches of internet marketing for over eight years.  He currently is the President/CEO of Vitabase, a leading health supplement company, selling hundreds of products under the Vitabase label.

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