Maybe they worked something out, after all: Sources say Google is set to begin running some of its AdSense display ads on Yahoo sites, and will become one of several ad networks Yahoo uses to fill some of its pages.

That means that the two companies will have a relationship similar to the one that Google has with publishers all over the Web: They give Google access to some of their unsold inventory, and Google inserts small ads it runs on behalf of its advertisers.

Last year, Google and Yahoo had lengthy discussions about a more involved ad tie up, including a scenario where Yahoo would essentially hand over its ad serving operations for all of its lower-priced ads directly to Google.

Those talks seemed to have petered out after interim CEO Ross Levinsohn was replaced by Marissa Mayer. But it’s worth noting that since then Mayer has hired former Google ad executive Henrique De Castro as her chief operating officer.

I’ve asked Google and Yahoo for comment. (Update: Here’s a blog post from Yahoo that confirms the move. Oddly, it has a publication time of 2:02 pm, which I assume is Pacific time, but is also in the future.)

It’s worth speculating whether the AdSense ads will lead to something bigger: Right now, Yahoo has a long-term deal with Microsoft to handle its large search ad business. And Mayer has publicly discussed her disappointment with the way that alliance has worked for Yahoo.

On the other hand, any truly significant tie-up between Yahoo and Google would certainly undergo a whole lot of regulatory scrutiny. Presumably the two companies think what they’re doing now won’t cause any problems in Washington or Brussels.

Yahoo Set to Use Googles Ad Network for Some Ads – Peter Kafka – Media – AllThingsD.

Internet video ads, long a sideshow in the online advertising market, are gaining in importance to marketers and Web publishers as they look to capitalize on consumers’ changing viewing habits and tap a $70 billion television market.

The ever-expanding array of gadgets that display online video, from tablets to Internet-connected TVs and DVD players, along with technology such as social media that facilitates distribution, has spurred new interest.

The growing trend means websites like Google Inc’s YouTube, Yahoo, AOL and Hulu have a better shot at tapping the mother lode of television advertising budgets, though video ads have a long way to go before they become as dominant a part of the marketing landscape as TV ads.

Research firm eMarketer says video is the fastest growing form of online advertising, with spending increasing 46 percent last year, and outpacing popular formats such as search ads and display ads.

Google does not break out financial results for its YouTube business, but CEO Larry Page said on Tuesday that spending among YouTube’s top 100 advertisers increased by more than 50 percent in 2012 compared with the year before.

There have been media reports that Facebook is developing a video ad service, and analysts will likely be looking for answers on that avenue when the social networking giant delivers its quarterly results on Wednesday.

At Yahoo, “one of our highest priorities was to create more online video experiences, because that’s where the demand is for advertising,” said Tim Morse, the former Yahoo finance chief who became CFO of video advertising technology company Adap.TV this month.

Advertisers are increasingly fond of video ads, Morse said, because of the similarities to TV.

“It’s the closest to what they’ve had offline. They’re looking for the same kind of medium where they can connect with consumers,” he told Reuters.

TURNING POINT

Chevrolet has been running online video ads for several years, but significantly ramped up its activities and investment in 2012, said Carolin Probst-Iyer, the manager of digital consumer engagement for the General Motors division.

“Last year was a bit of a turning point,” she said, as Chevrolet put greater emphasis on creating original video ads and looking for new ways to distribute spots, rather than simply running existing TV ads on YouTube and TV network websites.

One recent ad for the buzz-worthy new Corvette Stingray was viewed more times on mobile devices than it was on PCs, she said.

For Web publishers, video ads are good business. While typical banner ad rates can generate a few dollars per thousand views, video ad rates can reach $20 per thousand views, said eMarketer’s David Hallerman.

“All of the Internet advertising to date has come from print sources,” such as newspapers, magazines and yellow pages, said RBC Capital Markets analyst Mark Mahaney.

“We’re are at a point where television ad budgets are likely to come online.”

The explosion of new screens such as smartphones and tablets greatly increases the venues where consumers can watch video, whether they’re at their desks or on a bus. And social networking, which makes it easy for users to share favorite videos, has given marketers added incentive to produce video ads that can gain additional exposure by tapping into the social slipstream.

YouTube’s head of industry development, Suzie Reider, said marketers are increasingly developing ads that are tailored for specific audiences, making it more likely that Web surfers will actually watch them.

“We’re living in a day and age where nobody has to watch an ad that they don’t want to watch,” said Reider. “You can skip them on the Web, you can skip them on TV.”

To make its website more appealing to advertisers, YouTube has helped create hundreds of “premium channels” featuring professionally produced video as opposed to the amateur clips YouTube is famous for. And it’s developed a type of video ad that users can skip after five seconds – advertisers only pay if the ad is watched all the way through.

PRICE DEFLATION?

Despite the growth in Web video ad spending, which eMarketer estimates reached $2.93 billion in the United States last year, the firm said the spending still represents only about 10 percent of the broader online advertising market.

And that is a mere drop in the bucket compared with the $68 billion that Kantar Media estimates was spent on television advertising in 2011.

One potential constraint is the way big brands and agencies organize their marketing budgets, says Pivotal Research Group analyst Brian Wieser. Online video ads are typically funded from Web ad budgets rather than a much larger pool set aside for TV.

Analysts also note that the rich rates websites collect for video ads will decrease as more Internet sites open to ads – something that’s already happening thanks to technology that automatically pairs ads with videos on websites.

Still, many analysts and industry executives are optimistic about what they see as the bigger picture.

“The number of people watching TV seems to be stagnating or declining, and the number of people turning to the Internet for entertainment is surging,” said RBC’s Mahaney. “It almost inevitably drives these TV budgets online”

As world of gadgets grows, online industry tunes in to video ads | Reuters.

The Oscars may be a month away, but advertisers are starting to digitally link with ABC’s coverage. A pair of advertisers — University of Phoenix and Hyundai — have top-line roles on Oscar.com and a related ABC app.

The University of Phoenix is the presenting sponsor of a “My Picks” section on both properties, while Hyundai has the position for the “Nominees” area. Both are also running video spots online and on the app, which are sold by ABC.

On the site, the University of Phoenix has an Oscar-themed display ad saying: “And the award goes to … you. For taking the next step in your career.”

A third marketer, Samsung, has a presence on Oscar.com plugging its Galaxy line with a banner ad that clicks through to a Facebook entry point.

Both Hyundai — which is promoting a new crossover SUV — and Samsung were advertisers in both the Super Bowl and ABC’s Oscar coverage in 2012. The awards ceremony this year takes place Feb. 24 and will be hosted by Seth MacFarlane.

Studios with award nominees are also benefiting from Oscar.com, as their trailers can be viewed.

Last year, reports had ad prices for the Oscar-cast at around $1.7 million a spot. Ad Age reports that this year ABC has been landing deals for up to $1.8 million.

MediaPost Publications Advertisers Link With Oscar Site, ABC App 01/28/2013.

Huge international brands have unique challenges when it comes to delivering timely content across multiple channels. McDonald’s is one of those brands with no shortage of interesting content from wedding packages in Tokyo to the highly anticipated comeback of the McRib. But making that content make sense across 85 websites, more than 80 Facebook pages and 40 Twitter handles internationally was a challenge.

In his presentation at SocialMedia.org‘s BlogWell Conference in Los Angeles,McDonald’s Director of Digital and Social Media Sosti Ropaitis explains how they overcame this challenge at the 2012 Olympics in London.

Some tips Ropaitis shared for timely international engagement:

• Draw from your international employees. McDonald’s highlighted their “Best of Our Best,” the employees they brought from around the world to the London Olympics, in short videos. They were quick, fun, and avoided language and cultural dependencies.
• Work closely with your legal team. As if making these videos in two days wasn’t difficult enough, McDonald’s social media team also had to jump through all kinds of legal hoops from rights holders to stringent Olympic regulations. Ropaitis says he cannot stress enough the importance of this partnership.
• It’s all about context. It’s not just about telling a story, but about telling the right story in the right context. Ropaitis sums up their social media strategy with this formula: Engagement is a function of content, context and timeliness.

A new Gartner report projects that worldwide mobile ad revenue will increase 16% from $9.8 billion in 2012 to $11 billion this year and more than double to $24 billion by 2016.

“The mobile advertising market took off even faster than we expected, due to an increased uptake in smartphones and tablets, as well as the merger of consumer behaviors on computers and mobile devices,” said Stephanie Baghdassarian, research director at Gartner.

Regionally, the research firm expects mobile advertising in North America to rise 22% to $3.8 billion this year and reach $8.9 billion in 2016. In Western Europe, mobile ad spending will grow 19% to $1.9 billion and $4 billion in three years. Both regions will close the gap with Asia-Pacific, which has typically led the way in advertising because of its higher mobile adoption rates.

The Asian market will reach $4.9 billion this year and almost doubled to $9.5 billion by 2016, while the rest of the world increases to $788 million in 2013 and $1.8 billion in three years. The high-growth economies of China and India are increasingly expected to bolster mobile advertising as their expanding middle classes draw global brands.

Gartner believes mobile display ad spending will eventually overtake mobile search. Display will initially be split between in-app and mobile Web placements — reflecting consumer usage — before spending on Web display moves past in-app advertising starting in 2015.

The Gartner report also noted the rapid rise in consumer mobile use has outpaced ad demand, creating an inventory glut that drives down ad prices. That in turn has led to a large portion of inventory being scooped up by app developers buying ads to promote their apps, while selling similar ads in their own apps.

The research firm likened this type of “paid discovery” for apps to the ad bartering that took place among Web sites during the late 1990s, producing an inflated picture of ad revenue that contributed to the dot-com bubble.

“Some correction in the growth rate must occur before demand from brand and local advertisers catches up with supply, and more sustainable economics support a faster growth rate commensurate with consumer adoption,” said Baghdassarian.

It should also be noted that the Gartner forecast for North America is substantially lower than the eMarketer projection for U.S. mobile advertising released last month. The latter study forecasts $7 billion in mobile advertising this year, growing to $21 billion in 2016.

Gartner says its estimates including mobile Web display, in-app display, search and maps, video/mobile TV and messaging. They are also based on reported numbers by the main players in the mobile advertising network space (Google and InMobi), and in the digital media measurement space (comScore), as well as industry bodies such as the Interactive Advertising Bureau (IAB).

Read more:  MediaPost Publications Mobile Ad Revs To Hit $11B 01/18/2013.

Cross-channel marketing campaigns proved to be the most successful during the holidays. Search engines like Google and Bing were the key driver of traffic, along with organic cross-shopping across retail Web sites, according to Experian Marketing Services, which released a recap of 2012 trends Thursday.

Both search and social delivered the highest share of traffic to retailers on Black Friday, while email and affiliates proved important on Cyber Monday, according to the data.

Search lived up to its reputation for being a key traffic driver as consumers searched for deals. Search engines at 49% took the No. 1 spot for search and cross-shopping across retailers as the most common method of navigation. Shopping and classified sites took No. 2 at 16%, followed by other at 12%. Email services at 6%, portal front pages at 4%, entertainment at 4%, and rewards and directories at 3% skated by.

When it came to driving traffic, Facebook generated 3.8%; Amazon, 1.5%; and YouTube, 1%.

Despite weak overall sales growth during the holidays compared with last year, visits to Web sites rose across the majority of product categories. Cyber Monday maintained the top ranking for traffic. Visits grew 11% year-over-year. Black Friday and Thanksgiving followed with 7% and 6% growth, respectively.

Amazon.com took the No. 1 spot for Web site visits, followed by Walmart. BestBuy, Target, J.C. Penney, Sears, Kohls, Macy’s, Toys R Us, and Kmart rounded out the top 10 sites.

Target, J.C. Penney, and Toys R Us fell in visits to the Web site, while all others in the top 10 rose.

UGGs remained a cold weather favorite during the holiday season, topping the list of the hottest products, followed by Kindle Fire HD, Wii U, Toms Shoes, iPhone 5 cases, Nexus 7, iPod Touch, Furby, Doc McStuffins, and Ps3.

Online shoppers over-indexed against the online population for higher incomes and creditworthiness, although a high share of overall visits came from older, less affluent households, which might explain the 122.93% year-on-year increase to the coupon site RetailMeNot.com and the 79.43% increase to Slickdeals.net.

Read more: MediaPost Publications Search Engines Remain Key Driver To Web Sites 01/17/2013.

In its quest to drum up new sources of revenue, social network giant Facebook is currently testing a paid messages program that will enable users to reach out to those outside their network of friends for a fee of $1 per message. Although the service is early in the testing phase, it holds potential to alter the messaging function for both brands and consumers alike.

According to a December study by AYTM Market Research, 26% of surveyed US Facebook users reported sending and receiving messages often. Moreover, 35% said they sometimes used the messaging feature. The survey showed that only 13% of users never used the service.

Facebook is currently only testing paid messages for individuals, but should the program take off, it is likely that brand marketers will want in on the action. The pay option lets a user pay $1 via credit card to send a message to a Facebook user outside of his or her friend base. AYTM surveyed Facebook users about this capability and found the vast majority in opposition—90% of users said they would definitely not pay $1 to send messages to users outside their network. Brands might be less opposed to the option, however.

To date, social media marketers have not relied much on the message function to interact with Facebook users. Messages work differently for brand pages than they do for individual Facebook users. Brands are able to respond to a user’s wall post on their page via a personal message. They are also able to respond to an individual’s private message, but they aren’t able to message users of their own accord.

Data from the Relevancy Group indicated that in April 2012, 46% of US marketers reportedly used Facebook messaging as a marketing tactic. However, when looking toward the next 12 months, only 19% said they planned to continue using Facebook private messages.

When announcing its experiment with paid messages, Facebook stated that changes to communication tools are actually designed to bring more relevant messages to a user’s inbox. Facebook also recently added inbox filters so users can choose who they receive messages from and cut down on unwanted spam.

If Facebook’s experiments with paid messages are successful and they result in increased consumer usage of the messaging function, it’s likely marketer demand for a similar paid function will grow. Now that marketers can pay to appear on a user’s newsfeed, the ability to send relevant and targeted private messages to likers of their brand—rather than simply respond to user posts or messages—may soon be on the horizon.
Read more at http://www.emarketer.com/Article.aspx?R=1009599#AVhxdJIWtwGlX6G1.99

According to the to Interactive Advertising Bureau, total online ad revenue reached $9.26 billion in the third quarter of 2012, which is up six percent from the previous quarter and 18 percent from Q3 figure of $7.8 billion a year ago.

The CEO of IAB, Randall Rothenberg, said the growth is due to marketers recognizing digital media’s capacity for engagement and interaction. He cited social media and mobile on-the-go marketing as examples.

Here’s the IAB’s chart of online ad growth in recent years:

The upshot for publishers is that, while the mobile monetization riddle has not been solved, the growing amount of dollars flowing into the digital space is likely to produce solutions soon.

IAB compiles the numbers based on a revenue survey of web sites, commercial online services, free email providers and all other companies selling online advertising.

Read article: Online ad spending up 18 percent from a year ago, hits $9.26B in Q3 — paidContent.

One of the reasons for this is, of course, the growing smartphone and tablet penetration. Forrester found that about half of U.S. online adults now own a smartphone and two-thirds even own multiple connected devices. Tablet adoption doubled since 2011 and is now at 19 percent.

One trend that the Forrester report, which includes survey data from nearly 60,000 consumers in the U.S. and Canada, also notes is that 43 percent of consumers now connect to the web with their TVs. Forrester, just like similar surveys, found that most of these users rely on their game consoles to do so (42 percent), while connected TVs (19 percent) and Internet-connected set-top boxes like the Roku or Apple TV are only being used by 14 percent.

It doesn’t come as a surprise that Forrester’s research also found that there are still distinct usage patterns among different generations. The 18-to-23-year-old crowd, for example, is far more active on social networks than anybody else. About 70 percent of these Gen Zers, Forrester says, “visit social networking sites daily” and 85 percent visit Facebook at least once a month. Gen Y (24-32) is more likely to own a tablet (about 25 percent) and smartphone (72 percent) and Gen Xers (33-46) are most likely to spend their money by shopping online (an average of $561 in the past three months compared to an average of $449 for all U.S. shoppers).

Once you get to the Boomers (47-67) and the so-called “Golden Generation” (68+), technology adoption obviously lags quite a bit. Older online adults, for example, are more likely to use desktop computers at home and are less likely to own tablets and smartphones. Still, even among this group, tablet adoption has doubled to 14 percent since 2011.

Read article: Forrester: 84% Of U.S. Adults Now Use The Web Daily, 50% Own Smartphones, Tablet Ownership Doubled To 19% In 2012 | TechCrunch.

Even as retailers debate the efficacy of social-media marketing on Facebook and Twitter, they have no doubts about the power of a decades-old technology to drive sales. The killer app is called e-mail.

Retailers as disparate as Williams-Sonoma Inc. (WSM) and Home Depot Inc. (HD) have become much better at tailoring e-mails to specific customers rather than the one-size-fits-all blasts that once dominated this type of marketing. Measured by sales per dollar spent, e-mail outperforms social-media advertising three to one, according to the Direct Marketing Association, a trade group founded to provide accurate marketing data. That explains why retailers will send 19 percent more e-mails this year.

Compared with social-media, e-mail marketing will never be sexy, said Ted Wham, a vice president at Responsys Inc., a San Bruno, California firm that helps companies build digital relationships with customers.

“But it depends on what’s sexy to you,” he said. “In my opinion, making a high profit rate and bringing in a lot of incremental dollars is very sexy.”

Competition is fierce this holiday shopping season as the National Retail Federation predicts sales will rise 4.1 percent to about $586.1 billion in the period, compared with a 5.6 percent increase in 2011. Online sales may grow to a record $43.4 billion in the last two months of the year, a 17 percent increase from last year, according to ComScore Inc.

At the same time, the number of Black Friday and Cyber Monday shoppers making purchases after clicking through from social networks such as Facebook, Twitter, LinkedIn and YouTube declined by at least 26 percent this year from 2011, even as online sales soared, IBM Digital Analytics Benchmark said last month. So-called social sales contributed less than 0.5 percent of online revenue both days.

Smartphone Boom

Major retailers are on track to send subscribers an average of 211 promotional e-mails in 2012 compared with 177 last year, according to Responsys. The boom in smartphones means consumers check e-mail more often, at a time when data and web tracking are becoming more mainstream and easier to use.

The numbers drive a compelling case for that — e-mail provided $39.40 in sales per dollar of advertising this year, followed by $22.38 through Web search, $19.71 from Internet display ads and $12.90 from social networks, according to the Direct Marketing Association.

Home Depot has been honing its targeted marketing, sending e-mails that incorporate customer preferences and previous behavior, because it’s 10 times more effective than blasts to a general audience, Chief Marketing Officer Trish Mueller said in June.

Painting Electricians

For instance, if customer data shows electricians are no longer sub-contracting the painting portion of remodeling jobs and doing it themselves, an electrician that just bought copper wire may soon receive an e-mail for a discount on paint, she said. In the past, that person would just get an e-mail offer relevant to their known skills, she said.

Williams-Sonoma’s e-mail and browsing data is so expansive the company can use it to drive product recommendations by customer to specific stores, Patrick Connolly, the San Francisco-based company’s CMO said in October.

While stores still use old tricks including limited-time offers — a Bloomingdale’s e-mail on Dec. 12 read “FINAL HOURS! Mystery Savings” — they’re increasingly tailoring message content and timing to demographics, previously purchased or viewed products and items left in virtual shopping carts.

Williams-Sonoma’s West Elm urban furniture chain has sent e-mails to customers who have forgotten about items in their shopping carts with subject lines asking if they are still thinking about that particular merchandise. In the body of the e-mail, customers are warned: “Get it before it’s gone,” and “Don’t miss out on the things you love.”

Ad Portal

They’re also using e-mail as a “portal” to a flurry of ads across the Web, said Chris Saridakis, president of EBay Inc.’s GSI Commerce, which provides e-commerce services to hundreds of retailers.

Once a user clicks from an e-mail to a retailer’s website to see that forgotten organic cotton duvet at West Elm, say, or to browse the 30 percent-off shoes at Asos Plc, third-party trackers called cookies recall the activity. Later, while visiting a news website or Googling “clothes,” consumers may see banner or Google Inc. (GOOG) ads designed to lure them back to those retailers’ sites.

“It extends the life of an e-mail and we see that driving an incredible amount of return behavior back to the retailer’s site with a higher conversion rate,” Saridakis said in a telephone interview.

Retarget Customers

Williams-Sonoma may use as many as 200 different Internet advertisements per brand to retarget customers after they leave the company’s websites, which, while potentially surprising, is “very effective,” Connolly said in October.

It can take a lot of e-mails to hit the mark. A successful e-mail campaign may result in a 20 percent open rate with 5 percent of people clicking through and 1 percent making a purchase, though figures vary around targeted messages and holiday specials, Chad White, research director at Responsys, said in a telephone interview. On the other hand, about half of consumers will read postcards, the most effective form of direct mail, which is pricier, according to a report from the Direct Marketing Association.

Facebook Inc. (FB) has signed on retailers including Brookstone Inc. and Dean & DeLuca Inc. to a new gifting service this year as the company looks beyond advertising to monetize its more than 1 billion users.

Facebook Returns

Facebook Chief Operating Officer Sheryl Sandberg said in an October earnings call that a third-party analysis showed that more than 70 percent of 60-plus marketing campaigns on its website generated a return on ad spending of three times or better. Separately, data from Nielsen show that click-through rates are not correlated to returns on marketing investments, Elisabeth Diana, a spokeswoman for the Menlo Park, California- based company, said in an e-mail.

While the social network’s power as a sales driver remains unclear, letting customers use their Facebook accounts to sign onto a retailer’s website is an effective way to harvest e-mail addresses, according to Matt Kritzer, vice president of e- commerce for underwear maker Tommy John.

Facebook and Twitter “are more awareness activities,” Kritzer, the former director of e-commerce for L’Occitane, said in a telephone interview. “That’s why you need this glue of e- mail that ties it all together.”

That means retailers are keen to gather as many e-mail addresses as they can, a task made easier by mobile checkouts and e-mailed receipts. They’re also running sweepstakes and offering discounts to get shoppers to cough them up.

Acquiring Addresses

J.C. Penney Co. (JCP), which generated less than 10 percent of sales in its latest fiscal year from the Web, is aggressively acquiring e-mail addresses by shifting to mobile checkout and through its holiday sweepstakes. The department-store chain is giving away more than 80 million buttons with codes on them for a holiday sweepstakes, and customers are asked to enter their e- mail address or log in with Facebook to find out if they won.

This holiday season, some retailers are also taking advantage of shipping confirmations or order receipts, with higher open rates, to offer recommended items or additional discounts, GSI’s Saridakis said.

Retailers are more aggressively trying to persuade shoppers to keep accepting their e-mails than in the past, said Charlie Graham, the founder and chief executive officer of Shop it To Me Inc., which partners with retailers to send tailored discount alerts to more than 4 million members who have signed up for the service.

Hitting Unsubscribe

Instead of hitting “unsubscribe” and being done with it, customers are asked if they want the e-mails less frequently, or even if they want to take a three- to six-month break and reconsider, said Graham, who started his business in 2005 as part of a summer internship at Harvard Business School. At some retailers, such as J.C. Penney, customers are told that unsubscribe requests can take as many as 10 days to process.

The growth in mobile phones and tablets bodes well for e- mail. This holiday season, 45 percent of e-mails are being opened on mobile devices, according to Experian Hitwise, an Internet-tracking firm in New York. Shoppers are 29 percent more likely to open personalized promotional e-mails than untailored messages and are even more likely to click on them and go to a retailer’s website, the firm said.

E-mail has “gotten this bad reputation in the past of being spammy and people misusing it,” Kritzer said, explaining why more companies aren’t talking about it as a marketing tactic. “But it’s also because it’s the secret sauce that works so well. So people might not want to talk about it because it’s kind of like the golden goose. They don’t want to ruin the golden goose.”

To contact the reporters on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Read article: Stores Seeking Shoppers Find E-Mail Outdraws Facebook – Businessweek.