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eBay AdContext Ads – First Impressions

Ebay-Adcontext

I’ve had quite a few people asking me for my opinion on eBay announcing it’s intention to enter the contextual text link market.

here are the basics of it as reported this week by Reuters…

“The world’s largest e-commerce site said it plans to provide hundreds of thousands of eBay auctioneers with simple snippets of code they can embed on other Web sites that showcase items that are for sale on eBay’s site.

A test of the program, dubbed eBay AdContext, is set to be introduced early next week, Swaaij said. What goods appear in any particular advertisement will be determined by the keywords on that Web page, a technique known as contextual advertising.

EBay’s system scans the text of a Web site for keywords and returns links to relevant eBay sales listings to the Web page. A Web site about sports could automatically feature links to sporting gear or memorabilia available on eBay, for example.”

I’ve held off giving my opinion because I’m yet to see it in action but as I’m being asked about it so much thought I’d give a few initial comments from what I’ve read about it.

The ads are apparently going to run as text, image and flash ads (publishers choose which they want to run).

My initial reaction when I heard about eBay’s AdContext was two fold:

  1. On the one hand I was quite happy and intrigued. My feeling is that having more options for publishers to run ads is a good thing as each site is very different the more types of ads to experiment with the higher the chances of finding one that will suit a particular blog or site.
  2. 2. On the other hand I was dubious as to the success of yet another contextual ad network. The problem that will face eBay with their ads is that most publishers looking to run ads on a site will already have contextual advertising on their sites (AdSense or YPN mainly) and that both of these programs do not allow any other contextual advertising to be shown on the same pages.

I’m confused about the reports that eBay doesn’t see their AdContext ads as competing with AdSense or YPN – some reports are saying that they see them as complimentary and that they’ll run on the same sites together – but as I read the rules of AdSense I don’t see how they could be allowed.

Other contextual ad systems have launched in the last 12 months but in most cases they have either failed to catch on or have changed their ads to be non contextual (for example Chitika’s eMiniMalls switched their default mode to be non contextual).

So eBay will, in my opinion, have an uphill battle to covert publishers to AdContext because to do so will probably mean they need to give up their current advertising.

One incentive to get publishers to switch would of course be if AdContext coverts very well – but once again I’m unsure how well they will convert.

The article I linked to above says – ‘Web site affiliates receive a cut of 35 percent to 60 percent of sales, depending on volumes.’

When I first heard this I was quite interested – up to 60% of the ‘sale’ in an auction sounds quite good if the auction goes for a high price but then I started to do the maths. The thing about auctions is that there is only ever one winner or one sale. The amount of bidders on an item might be reasonably high but the likelihood of an ad click producing the one and only sale in an auction can’t be particularly high can it?

Of course publishers don’t get 35-60% of the sale price (what person holding an auction would be willing to pay that much!) – instead its’ a percentage of eBay’s revenue from the auction. eBay earns 6.5% of the auction value – which means as an affiliate you earn between 2.27% and 3.9% of the auction sale price – if the person you refer actually wins an auction (up to 7 days after you refer them if the conditions are the same as their regular affiliate program).

I’m not saying that it’d be impossible to do well out of these ads – but I wonder whether the average blogger will do better out of them or other forms of contextual advertising. I can definitely see eBay AdContext ads working well on site’s that follow auctions but wonder how many bloggers are going to make much off them.

Of course it’s too early to make judgments on an ad system that is yet to launch – but I’m pretty skeptical at this early stage and while I welcome new ad systems into the space wonder whether eBay might need to adapt it’s ad system to get the attention of publishers.

About Darren Rowse

Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook, Google+ and LinkedIn.

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Comments

  1. bernard says:

    The main problem I see is that with this system ebay will in fact get visitors in that they used to pay for before via ad programs like adsense (on which we get a percentage, remember?).

    In other words, bloggers and other websites will give free unpaid traffic to ebay except the lucky one that sent the winning bidder. Now, how charming I think ebay is, I do not see them bring traffic to my site for free, so why should I do it for them… for free?

    The only way this will work is for sites that have directories to search in or the many shopping malls added to portals. Not really the kind of sites that I visit.

    A pity because there were better ways to introduce this program, namely a combination of clicks and sales. Now it is just sales and sorry, the percentages on the little prices do not justify this program.

  2. Robb D says:

    Darren,

    You make some very good points here. I am curious to see how eBay is going to pull this off.

    It seems to me like this would need to get an awful lot of clicks to every make any money from this if you only get paid if your referral wins an auction.

  3. Rob says:

    How about some of the ebay “buy-it-now” content?
    – the small businesses that use ebay as a distribution / marketing chain and sell rather than auction most of their products?
    They would / should have more “winners” than the average auction.

  4. bernard says:

    @ rob: you have a point there but i do not think ebay will let you allow taking buy now only, because that was my first thought as well…

  5. Carl Johnson says:

    This is good IMO. Another option for publishers who got kicked out from Google or Yahoo.

  6. brem says:

    Carl: If they got kicked out, why wouldn’t ebay kick them out as well? :) No smoke without fire. IMO

  7. This just seems like a very poor substitute for other affiliate programs. Like Darren pointed out, we’re likely to be getting less than 5% of the sale, and that’s IF the buyer wins. Most affiliate programs offer much more than this. Throw in the fact that it is contextual, which means it won’t be allowed on the same pages as Adsense… well… I really see no reason to use eBay at all.

    It’s a lower paying affiliate program that can’t be used with YPN and Adsense… seems like a lose-lose to me. The ONLY two reasons I could see using eBay’s ads are if the publisher was not allowed into Adsense or YPN (though as mentioned above, eBay will probably not like your site either), with the other reason being that your site focuses on eBay (like one of those blogs that focus on weird eBay auctions).

    Unless the % is up way higher and the ads are able to be used with Adsense and YPN, I don’t think I’ll ever be using it.

  8. Kiley says:

    Personally, I cannot wait for this program to hit the ground.
    I have signed up for the Beta program and I really see some potential in this, more in the future, than now though.
    I can see this being “tuned” for a combination of clicks and sales, that would be way profitabnle for both eBay and publishers.

  9. saurab says:

    Darren,
    some astute observations, as usual :)
    I think this is even less lucrative than CJ’s performance based affiliate programs…. reason ? like you said, for every auction there’s only one winning bid… unlike affiliate programs in gerenarl where every sale brings home affiliate commissions to the publisher. I dont think this system will work in the long run…
    but i think this is typical of the cautious approach companies like Ebay take … unlike nimble-footed, forward thinking companies like google.

  10. David Bain says:

    I don’t understand why eBay feel that they have to make this service contextual. Why not follw Chitika’s eMiniMalls’ lead and ask publishers to select an ad category? Surely with their existing category database that would be ideal? And then they’re not putting themselves head-to-head with Adsense & YPN.

  11. Tom says:

    When I first heard about it, I was gutted, having spent the last 6 months developing and testing an eBay ad brokering system using their API and was going to launch in a couple of weeks

    However, it looks like they are going down the ‘contextual’ route… which has even more problems than already listed!

    What I do know, is that the ads created by eBay auctions are not as ‘blog-friendly’ as GoogleAds.. as they are ‘uncontrolled’

    (GoogleAds organises their ads very effectively)

    But eBay auctions are not so well-managed, many of them have:

    Unusual fonts, colours, characters, highlights and odd text spacing;
    which clash with the blog and therefore screm ‘advert’.

    And they also have…

    Crap headlines followed by crap sub-heads!

    I mean the headline doesn’t match or help the item they are selling!?!

    This means the ad on your blog is only as good as the eBayer and the delivery of the contextual system to mach your content with theirs… not a route that I went down!

    I decided to let the blogger select their own terms and results – which means you get the right ads without it being a ‘contextual’ system.

    Maybe I have a chance after all…

  12. pcunix says:

    Well, yes, the 2 or 3% isn’t much, but on the other hand if you were serving from a tech site where the auctions could potentially be for fairly high priced items, the payout could be pretty good.

    It’s the contextual part that bothers me – I’d prefer to specify key words so I could run these with Adsense.

  13. Andy says:

    I would be interested to try the eBay program but I am not going to give up my adsense to see how eBay works. Also I don’t think my content would serve up very lucrative auctions. Maybe if eBay decides to make it non-contextual down the road I will give it a try.

  14. Arnie says:

    Everyone is focusing on the low probability of an AdContext click leading to a transaction on EBAY but lets face it, the same is true for AdSense. In actuality, a small percentage of people who click on an AdSense link actually make a transaction on the other side. At first glance you might say you don’t care because you get paid for every click, but from an overall economic point of view, it’s only the one completed transaction that funds all the click-throughs.

    In other words, you can have 10 clicks of AdSense paying you $1 per click ($10 total), or you can have 10 clicks of AdContext where only one click actualy leads to your payment of $10.

    Also definetely consider that EBAY will offer ‘Buy it Now’ items on AdContext as well as items that are very near the end of their auction (so chance of winning is higher).

  15. Darren Rowse says:

    I hear you and agree but doubt that that many clickers on ads will bid, let alone win auctions.

  16. bernard says:

    simply put, eBay takes no risk with this model, instead they are pretty sure to get more traffic and a winning bid which might be higher than before launchin this service.

    Double win from their side and almost a sure double loose for the publisher’s side. Plus, tak in account that these inserts will also drive traffic away from adsense inserts (if allowed on one page remember) and you are in one hell of a bad economic situation :)

    eBay needs to add at least the next things before they can find a place on my site/blog :
    - buy now only items with higher pay out per item
    - non contextual results using keywords
    - an affiliate system that is so globally easy and uniform as with Google. International payments are still horror with ebay as you have to work with x partners in x countries. As a Belgian site I get visitors from everywhere and I need at least 14 accounts to service every country (and that still leaves many out), not so with Google adsense.

    Na for the moment. :)

  17. I, for one, am excited to try this new system. As a powerseller on ebay, I totally am for this!

  18. Eric Gregoryh says:

    After click-fraud, AdSense’s second biggest weakness is they only accpet “family friendly” sites. I don’t think eBay has such a policy.

  19. bernard says:

    I am also a power seller on eBay and in that condition this new tool is great BUT as a publisher it is not. Anyway, I will be eating from at least one if not both sides when it starts operating.

  20. Ken says:

    I’m one of the product managers for eBay AdContext. I just read Darren’s post and everyone’s comments and I wanted to give everyone some information so you can decide if AdContext is worth your time (or not :). I’ll try to keep it factual so you won’t think I’m trying to pull some marketing spin here.

    Payout structure: The payout structure for eBay AdContext is based on eBay’s affiliate program. In the US this based on a revenue share for bids, BINs as well as each new confirmed registered user (CRU) you send to eBay. Details are here: http://affiliates.ebay.com/program-details/compensation/ For other countries where eBay operates the compensation structure is not revenue share but pays out on each bid, BIN and CRU (for example, see the UK payout structure at http://affiliates.ebay.co.uk/how%2Daffiliate%2Dprogramme%2Dworks/compensation/)

    Revenue share percentage: Note that the minimum tier pays 40% of the revenue and the maximum tier is 70% (not the 30% and 60% that Darren had in his original post).

    Buy It Now (BIN): Publishers will have the ability to have ad units show only BIN listings in the ad unit if they so choose. This should address the concern that was raised that people raised about not allowing BIN listings to be part of AdContext. Also, as Arnie pointed out in his comment, you can show auctions that are close to their ending time so the odds of winning quickly are higher.

    Winning Bids/BINs: Note that the publisher can actually generate revenue from multiple winning bids/BINs (not just one). The publisher “owns” the referral for up to 7 days and any winning bids/BINs generated in this time period contribute to the revenue shared with the publisher. For instance, a person reading a cell phone review can click on an ad unit for a cell phone and purchases it via Buy-It-Now and then may decide to place a bid on a bluetooth headset and win that auction 4 days later. Both the revenue on BIN cell phone and the auction bluetooth headset are part of the revenue share to that publisher. Note that since tracking is done on a “last publisher to refer the user wins” basis by CJ.

    Category Hints: When creating their ad unit publishers have the ability to provide category hints to the system. These category hints map 1-to-1 to the eBay category structure and will optimize the keywords and the listings that are displayed in the ad unit . For instance, if you know that your site is oriented towards sports memorabilia instead of sporting goods, you can provide a category hint that will allow AdContext to focus on just sports memorabilia. This addresses David Bain’s comment about Chitika’s eMiniMalls ad categories.

    Ad Unit Look and Feel: The ad units are highly customizable by the publisher to fit in with their website’s design. Your ad unit look and feel only takes 2 things from the auction listing: the text of the listing title and the listing picture. The colors, fonts, spacing that are selected by a seller on eBay for their listing do not override your ad unit look and feel. This addresses part of Tom’s comment on how AdContext ad units would be not as blog-friendly.

    Listing Titles: Tom also mentioned in his comment that listings have “Crap headlines followed by crap sub-heads!”. I’ll admit that listings titles (aka headlines) are totally controlled by the seller (after all they do apy for them) and some of them are not what you would call professional. But I will say that I believe the vast majority of listing titles are straight to the point and relevant. Note that economic Darwinism will be at play here. If a seller consistently uses odd listing titles and they negatively impact the seller’s business then it will be less likely you will see these odd listing titles. However, if the odd listing titles actually don’t harm or even improve the probability of a person clicking through on a listing, then do you really care if the listing titles are odd? Another thing I should mention is that the contextual matching system is not entirely dependent on the listing title to perform the keyword matching.

    Contextual vs. Non-contextual: AdContext will actually let you create ad units that display listings that match keywords the publisher chooses. A non-contextual ad unit (sort of an oxymoron) is the result. Tom mentioned at the end of his comment how this is a good way of getting the “right ads without it being a ‘contextual’ system”.

    OK, that’s it for the facts. I just wanted to give some general comments too:

    I can’t comment on other company’s advertising system’s terms of service (TOS) but I hope you find AdContext’s TOS flexible. I know that at the end of the day publisher’s have to make an economic decision and pick the solution that monetizes the most efficiently for them.

    Darren correctly points out that the 40-70% the publisher receives is not from the winning bid/BIN price but is from the revenue that eBay would take from the transaction. While his percentages seem small (the correct values are 2.6% to 4.55% using his 6.5% take-rate figure) a lot of eBay’s affiliates drive significant monthly revenues using this exact same payout structure. I’m not at liberty to disclose what they are though. But unlike other company’s we tell you up front what percentage of the revenue we are sharing with affiliates.

    There are several comments about the effectiveness of the system and the number of clicks it would take to deliver a revenue generating event. At the end of the day I would say publishers are most concerned about how effectively they monetize their inventory of page impressions. It all depends on the average selling price (ASP) of the eBay listings that you send your site visitors to. AdContext could be equally lucrative for publishers in high-volume/low-ASP and low-volume/high-ASP models and in-between as well. Publishers whose content matches well with eBay listings are likely to be the ones who moentize the best.

    I would also like to mention that as part of the eBay Developer’s Program we announced a new API call: getContextualKeywords. This allows developers to access the backend technology that powers AdContext and to develop their own applications that leveral our contextual analysis system. Whether your goal is to build another advertising solution or something unique our system will analyze URLs that you provide it and suggest contextually relevant keywords in a rank ordered list.

    Thanks for reading, hopefully I’ve provided you the information you need to decide to try eBay AdContext (http://affiliates.ebay.com/ads/adcontext/).

  21. bernard says:

    Thanks Ken for the thorough info. This sheds some light already and answers most of my questions as well. One remark though, I wonder why eBay’s press dept. did not communicate this earlier already, it would have prevented lots of misunderstandings ? Thanks anyway.

Trackbacks

  1. [...] eBay folgt den Spuren von Google AdSense. Und Darren schreibt voller Sorge: I’m confused about the reports that eBay doesn’t see their AdContext ads as competing with AdSense or YPN – some reports are saying that they see them as complimentary and that they’ll run on the same sites together – but as I read the rules of AdSense I don’t see how they could be allowed. Other contextual ad systems have launched in the last 12 months but in most cases they have either failed to catch on or have changed their ads to be non contextual (for example Chitika’s eMiniMalls switched their default mode to be non contextual). So eBay will, in my opinion, have an uphill battle to covert publishers to AdContext because to do so will probably mean they need to give up their current advertising. [...]

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  3. [...] As for what Ken posted at Darren’s site, this comment stuck out: Darren correctly points out that the 40-70% the publisher receives is not from the winning bid/BIN price but is from the revenue that eBay would take from the transaction. While his percentages seem small (the correct values are 2.6% to 4.55% using his 6.5% take-rate figure) a lot of eBay’s affiliates drive significant monthly revenues using this exact same payout structure. I’m not at liberty to disclose what they are though. But unlike other company’s we tell you up front what percentage of the revenue we are sharing with affiliates. [...]

  4. [...] to relevant products, and maybe eBay does, too? This is what ProBlogger Darren Rowse said about eBay’s AdContext in June [...]

  5. [...] posted about eBay’s new contextual system this morning and the general consensus I’m hearing is it probably won’t work. I [...]