E-Commerce
Really Simple Sale?
As RSS feeds catch on, advertisers are taking notice
By DAVID KESMODEL
Staff Reporter of THE WALL STREET JOURNAL
October 24, 2005; Page R12
As more consumers turn to a little-known online technology, will advertisers be close behind?
A handful of companies are betting on it.
The technology, known as Really Simple Syndication, or RSS, allows users to automatically gather updates from various Web sites, especially news sites and blogs, and display headlines and a brief summary of those updates in a single location, known as a news reader or aggregator. You can download an aggregator program from the Web or you can establish an account with an aggregator Web site.
RSS feeds, as they are called, have been around for more than five years. But they have only recently begun to catch on with news and blog junkies. And with that growth, some companies have begun exploring the technology’s potential for another use: advertising.
These early players say RSS feeds offer advertisers a natural place to target a very specific audience — and one that would be receptive to particular ads. So an ad from, say, a wireless phone provider would run in a feed from a niche Web site about cellphones. Another lure is that advertising in RSS feeds is considerably cheaper per viewer than banner ads — although pricing is expected to rise as demand increases.
RSS feeds “are the next avenue for smart marketers to look to,” says Jeff Hinz, a senior vice president for ID Media, an Interpublic Group unit that helps companies decide where to spend ad dollars. “You’re reaching a consumer who’s raising his hand, who’s looking for relevant information.”
Most RSS ads are simply a few lines of text. They tend to have a border around them and a label of “advertisement.” They may differ in color from the article and blog summaries that run next to them inside the aggregators. Such ads are placed in the feeds by a variety of companies. For instance, Yahoo Inc. and Google Inc. are placing ads for their existing network of advertisers on the feeds of various blogs. Ad revenue generally is shared between the companies and the blogs. Media company Washington Post Co. is running ads on its news feeds. And a few start-ups are helping companies, for a commission, to run their ads in the feeds of dozens of blogs and other sites.
So far, though, the revenue generated from RSS ads represents a tiny fraction of the booming online advertising business, which was valued at about $9.6 billion last year, according to the Interactive Advertising Bureau, a trade group for online marketers. No one is tracking total sales of RSS ads yet.
“Most advertisers are dipping their toes in the water and trying to figure it out,” says Bill Flitter, vice president of marketing at Pheedo Inc., one of the ad brokers. “It’s a new medium and people don’t quite understand what it is. It’s like email was back in 1995 and 1996, where it was just text.”
Ads That Resonate
One way for companies to get their ads onto an RSS feed is through companies like Pheedo, which line up ad space for advertisers and collect a commission on the deal.
Pheedo places ads in the feeds of such popular sites as Engadget, a blog about gadgets, and Autoblog, a blog about automobiles. The Emeryville, Calif.-based start-up offers three pricing models: An advertiser can pay a flat fee to have an ad appear for a certain period of time; pay a fee each time an ad appears; or pay only when users click on an ad, a system known as pay-per-click advertising.
Prices vary depending on the type of feed. Advertisers trying to reach a niche audience, such as computer lovers, may pay as much as $2 each time someone clicks on an ad, says Mr. Flitter.
A pay-per-click ad recently placed by Pheedo for GoToMeeting — a service that allows businesspeople to hold meetings over the Internet — featured three lines, including a request that viewers “try a 15-day free trial!” The ad has been appearing in feeds for blogs like Alarm:Clock, which reports on the business of technology start-ups.
Citrix Systems Inc., the software company that owns GoToMeeting, likes the targeted nature of the advertising. “We’re in technology, and the early adopters of [RSS] are exactly the people that resonate with our products and offers,” says Cailin Pitcher, senior marketing manager of the Fort Lauderdale, Fla.-based company’s online division. Ms. Pitcher declines to say how many users clicked on the ads or what they cost, but says the campaign “has been successful enough for us to justify continuing to use the channel.”
ID Media has found that clients experimenting with RSS ads have been able to attract customers at a relatively low cost of acquisition, or the price of running an ad that leads to a new customer. The New York-based company says it has bought such ads for camera maker Nikon Corp. — using Pheedo’s service — and a half-dozen other clients, which it declined to name.
But, ID Media’s Mr. Hinz says, the technology still needs to improve so marketers have a better understanding of which ads placed in feeds are most effective at garnering interest. Pheedo and competitors say they’re working on tools to help marketers collect better statistics.
Expanding Their Reach
Big players online see the potential of RSS ads as well.
Google is using RSS advertising as an extension of its AdSense program, in which certain Web sites run related ads from Google’s network of advertisers. For instance, a Dell Inc. ad might run on a site about computers. With RSS, Google signs up sites and blogs to run ads on their feeds — and shares ad revenues with them. Among the blogs doing this is the Unofficial Apple Web Log.
Google has a limited number of advertising spots available while it tests the channel, but demand is outstripping supply, says Shuman Ghosemajumder, a product manager at Google. Advertisers either pay per click or pay a set fee each time an ad appears. Many of the advertisers are smaller technology companies, like Web-hosting services StartLogic.com2 and HugeHost.com3.
Meanwhile, Yahoo has been testing the expansion of its network of advertisers into RSS feeds. Yahoo is using FeedBurner, a Chicago-based company that manages the RSS feeds for thousands of small blogs, to place ads in the feeds of FeedBurner’s clients. These include the popular Boing Boing technology-and-culture blog. Yahoo also shares ad revenues with the sites.
Paul Volen, vice president of product marketing for Yahoo Search Marketing, says it’s “way too early” to tell whether placing ads in RSS feeds will become a significant source of revenue. But one advantage of the advertising method is that subscribers to the feeds don’t fork over any personal information, such as an email address, so they have fewer privacy concerns than they do with other types of online advertising, he says.
The News Angle
Many media companies distribute news summaries through RSS feeds. But, so far, only a few have begun selling ads inside them.
Washington Post began placing ads inside feeds of news summaries from WashingtonPost.com in July. Its launch customer is MSNBC, the cable-TV news network, which has advertised its nightly news and commentary program “The Situation” hosted by Tucker Carlson. DaimlerChrysler AG and Lifetime Television also have advertised.
The Post is charging a fee for each time an ad is presented in its feeds. A company spokesman says the ads are slightly cheaper than those on the paper’s Web site. The Post chose to develop the model in-house, rather than team up with a vendor like Pheedo.
“We’ve seen a huge amount of interest in RSS from the advertising community,” says Caroline Little, chief executive and publisher of Washingtonpost Newsweek Interactive, the Post’s online publishing arm. “Across the board, advertisers are interested in reaching people in new and different ways.”
What’s RSS, Anyway?
But before companies can start chalking up a lot of ad sales in this new forum, more people need to understand what the RSS feeds actually are — and begin using them.
Only half of blog readers recently polled by research firm Nielsen/NetRatings said they had heard of RSS — and they’re considered a tech-savvy group. Only 11% used the technology to monitor blogs, the firm says.
Forrester Research Inc. says only 6% of online adults in North America read information using RSS feeds.
Some key developments, however, could spur more adoption. For instance, Microsoft Corp. said recently that it would include a feature in the next version of its popular Web browser, Internet Explorer, that would allow users to subscribe to feeds and view them. The new browser will be released with the next version of Microsoft’s Windows operating system, called Vista, slated to come out next year. It’s now available in a test version.
Some argue that one hurdle to wider use of RSS is the arcane acronym itself. Microsoft has tentatively used the term “Web feeds” as an alternative, a move that has prompted criticism from a few purists in the blogosphere. Google and others, meanwhile, have used the term “feeds.”
“The name needs to change,” says Pheedo’s Mr. Flitter. “It needs to be easier.”
–Mr. Kesmodel is a reporter for The Wall Street Journal Online in New York.
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