June 11, 2006

Ebay Enters “Contextual Advertising” Business

Posted in Advertising, Personalization, Search at 5:33 am by mj

As reported seemingly everywhere, Ebay is entering the contextual advertising business, where ads on affiliates’ sites will link directly to active auctions on Ebay whose items match the content on the current page. This is most likely a good thing for Ebay sellers. The value to small-time content publishers remains to be seen, since I believe the TOS on the GYM team offerings forbids forays into multiple advertisers.

This marks the fourth major player to enter this arena, which means it’s time for somebody else to come along and change the nature of the game. Once everybody has the know-how and the infrastructure, the market becomes ripe for a superior differentiated product.

Contextual advertising is a bit of a misnomer, since the actual context of the user’s session really doesn’t come into play. Rather, it refers to an advertisement appearing in the context of the content on the page.

For example, let’s say I (as the content publisher) know that you came to a page by searching for “aluminum siding” (yeah, I know). Although the page itself probably has at least one of those words, my advertising partner of choice has no real way of distinguishing my interest in aluminum siding from my interest in vinyl siding (which is also contained on the page). And they certainly have no clue that I’ve skipped over 12 other search results because they didn’t contain exactly what I wanted.

But intent through explicit search is only a small piece of the puzzle. What if I knew you came to a page through a recommendation my system offered you, and I (of course) know the criteria that was used to make that recommendation?

Most advertisers are equipped to take “hints” from the publisher, in the form of additional keywords, but they’re not equipped to (a) accept a lot of additional keywords, or (b) accept keywords that we’d like to negate, or (c) consider the real context of the user’s session, or (d) learn from a user’s behavior, to further refine their model of the user’s context (intent).

Maybe by considering, say, the last 8 pageviews within the last 30 minutes (those with contextual ads, anyway), they’d get closer in some circumstances, but they’d flub it in many situations. This is even more true when only certain pages contain calls to the advertiser, and those pages probably are not the ones providing the meat of the context.

Further down in the report, the reporter also mentions that Ebay is studying the possibility of opening up their user feedback system in some way. That seems like more of a trial balloon being floated to gauge interest and, more imporantly, to take suggestions on how to do so in a way that provides value, but still keeps the most important part proprietary. Hence the “it could take several years” comment from their director of developer relations.

Still, tying reputation systems into advertising–and, maybe going even further, establishing seller reputation on a publisher-by-publisher or user-by-user basis–seems like the next logical step.

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