In light of the recent blog post by our CEO, Venkat Kolluri, I thought I’d add some more breakdown to that blog post.

What happened in the marketplace? 2008 brought a shift in the marketplace and our advertisers are now paying out on different models, as you can see from the diagram above. Lets take an example of what exactly happened here:

  • In 2007: An advertiser (like say “Best Buy” or “Circuit City”) had no problems paying 20-50 cents CPC to get a click from a Publisher (say X). As long as enough of those clicks converted to sales at their end, these advertisers were happy.
  • In 2008: The shopping/retail marketplace changed given the tough economic climate in the United States. Now, every advertiser is coming to the table is DEMANDING 2+% conversion rates. In other words, of the 100 clicks sent by Publisher X, atleast 2 should convert into sales.

What is Chitika doing about this ? To adapt to the new marketplace, Chitika took a couple of steps: 1. Launched Chitika | Premium: This new unit is designed to take advantage of your search engine traffic and pays on a CPC basis. The good thing about this is: Since search engine traffic is high converting, advertisers are happy. Also, since the ads are targeted to the exact queries being typed by users, the content is very good and the CTR is excellent. As you can imagine, users getting good search engine traffic are seeing excellent results on this unit. 2. Launched the Chitika Graphic Ads program: So what happens to traffic that is not from search engines ? Our analysis has shown that these users hardly click on ads. So showing CPC ads to such users (e.g. people who read your blog regularly but never clicks on ads) is a waste of advertising inventory. For such publishers, we implemented a “yield optimization” system to show graphic ads. The beauty of this is that this yield optimization has actually resulted in better results for some of our publishers (specially the ones who used to not get too many clicks before). 3. Launched Direct Ad Sales Initiatives (like AdPro) — This allows the publisher to collect direct revenue from advertisers that might be interested in their site. Stay tuned for more information on this program soon.

Who Will Benefit From these changes ? 1. Publishers with good search engine traffic: The Chitika | Premium unit is working out great for our publishers with good search engine traffic. Such publishers are benefitting from targeted CPC text ads in a competitive marketplace. And on the advertiser side, this creates good conversion rates. This matching of publisher to advertiser is creating a nice health marketplace for all parties involved. 2. Publishers with very high traffic — but who were not getting clicks in the old system. These publishers are now seeing their yields optimized by the chitika system intelligently switching between premium ads and graphic ads. 3. Publishers with good content/brand name sites: These publishers will really benefit from the new tools like AdPro that Chitika is starting to roll out.

Who Will NOT Benefit From these changes ? Any publisher who does not get significant traffic from search engines. For such publishers, we have made available two options: a. If you have a high conversion rate (meaning that your clicks convert into sales for the advertisers) you will be successful with the CPA ads. b. If you have a high amount of traffic (whether it converts or not) you can benefit from our CPM Graphic Ads program. Publishers who got at least 1000 total impressions during June 2nd-8th 2008, should have got a detailed analysis report from me (Alden DoRosario, CTO) with customized recommendations. This should show key metrics for your traffic along with helpful links and recommendation tips. If you didn’t get this email, checkout the generic version in this blog post. By Alden DoRosario, CTO Chitika, Inc.