BlogAds Analysis - Executive Summary
Welcome "Across the Atlantic" readers. If this is your first time here, I invite you to take a look around the blog after reading this post. Here are links to my profile, post archive, and Social Science Research Network page where my academic papers are listed.
OVERVIEW
This past summer, just before leaving MIT for a teaching job outside Dubai, I collected some data for an empirical study on blog advertising. The specific objective of the study was to determine the strongest predictors of the revenue earned by ads appearing on blogs. In short, my findings are as follows:
(1) the number of weekly page views (WPV) is a much stronger predictor of weekly ad revenue and price than are either the number of inbound links or the number of blogs providing those links
(2) the number of ads has a negative impact on ad price and a largely positive effect on ad revenue, and
(3) the political orientation of the blog matters: on average left-of-center blogs significantly out-earn their right-of-center counterparts.
RESEARCH DESIGN
The study’s design is quite straight-forward. The first step was to gather data from the website of BlogAds, a North-Carolina-based company serving banner ads to over 1000 blogs covering a wide variety of topics and focus areas. One unusual feature of the BlogAds website is the wealth of detailed information it contains about each blog (page views, URL, topic/focus), its blogger (age, gender, state/country of residence, political orientation) and the blogs' ads (the number, kind, and position of ads, as well as their price). Two pieces of information- the price and the number of ads- were particularly valuable because together they can be used to calculate the total ad revenue for a given blog. I am aware of no study to date which has used this figure in analyses of blog or internet advertising.
DATA
With data in hand on 1357 ads appearing on 491 blogs, I next set about to develop and test a statistical model to estimate how well three groups of factors explain the differences in revenue across these blogs. Those factors were:
(1) the blog’s popularity, as measured by the number of weekly page views it receives and the number of sites that link to it
(2) the blog’s ad count, as measured by the number of ads appearing on the blog, and
(3) the blog’s political orientation, as indicated by my categorization of the blog as either right-of-center or left-of-center
SUMMARY OF FINDINGS
(1) Traffic Is King. Page views are the strongest of the three predictors tested: it explains at least twice the variation in ad revenue that either the number of inbound linking sites, the number ads, or the political orientation do. Taken together, page views, the number of ads, and political orientation explain over 80% of the variation in the ad revenue, a very substantial amount. This indicates that the statistical model predicts ad revenue with a high degree of accuracy. Doubling the weekly page views results in a 50% increase in ad revenues.
(2) Space Matters, Even in Cyberspace. Holding page views constant, the average effect of adding one more ad is a 20% decrease in price and a 40% increase in revenue. Interestingly, the number of ads on most blogs is well below the number where returns to revenues become negative, i.e. the point where increasing the number of ads results in less, rather than more, revenue.
(3) Partisanship Pays, But Unequally. When controlling for both the number of weekly page views and the number of ads, politically-oriented blogs generate no higher ad revenue and command no higher ad prices than other blogs. However, revenues from ads on left-of-center (LOC) blogs are 40% higher than average while their right-of-center (ROC) counterparts’ revenues are 23% less. There are notable exceptions to this general trend, however. While LOC blogs dominate at both the lower (below 100,000) and the upper (above 1 million) ends of the weekly page views continuum, ROC blogs earn much more in the middle territory. Potential explanations for this difference, along with graphs, tables, statistical analyses, and a discussion of the other results, can be found in the full report.
PS: I welcome any and all feedback and comments on these results.
This past summer, just before leaving MIT for a teaching job outside Dubai, I collected some data for an empirical study on blog advertising. The specific objective of the study was to determine the strongest predictors of the revenue earned by ads appearing on blogs. In short, my findings are as follows:
(1) the number of weekly page views (WPV) is a much stronger predictor of weekly ad revenue and price than are either the number of inbound links or the number of blogs providing those links
(2) the number of ads has a negative impact on ad price and a largely positive effect on ad revenue, and
(3) the political orientation of the blog matters: on average left-of-center blogs significantly out-earn their right-of-center counterparts.
The study’s design is quite straight-forward. The first step was to gather data from the website of BlogAds, a North-Carolina-based company serving banner ads to over 1000 blogs covering a wide variety of topics and focus areas. One unusual feature of the BlogAds website is the wealth of detailed information it contains about each blog (page views, URL, topic/focus), its blogger (age, gender, state/country of residence, political orientation) and the blogs' ads (the number, kind, and position of ads, as well as their price). Two pieces of information- the price and the number of ads- were particularly valuable because together they can be used to calculate the total ad revenue for a given blog. I am aware of no study to date which has used this figure in analyses of blog or internet advertising.
With data in hand on 1357 ads appearing on 491 blogs, I next set about to develop and test a statistical model to estimate how well three groups of factors explain the differences in revenue across these blogs. Those factors were:
(1) the blog’s popularity, as measured by the number of weekly page views it receives and the number of sites that link to it
(2) the blog’s ad count, as measured by the number of ads appearing on the blog, and
(3) the blog’s political orientation, as indicated by my categorization of the blog as either right-of-center or left-of-center
(1) Traffic Is King. Page views are the strongest of the three predictors tested: it explains at least twice the variation in ad revenue that either the number of inbound linking sites, the number ads, or the political orientation do. Taken together, page views, the number of ads, and political orientation explain over 80% of the variation in the ad revenue, a very substantial amount. This indicates that the statistical model predicts ad revenue with a high degree of accuracy. Doubling the weekly page views results in a 50% increase in ad revenues.
(2) Space Matters, Even in Cyberspace. Holding page views constant, the average effect of adding one more ad is a 20% decrease in price and a 40% increase in revenue. Interestingly, the number of ads on most blogs is well below the number where returns to revenues become negative, i.e. the point where increasing the number of ads results in less, rather than more, revenue.
(3) Partisanship Pays, But Unequally. When controlling for both the number of weekly page views and the number of ads, politically-oriented blogs generate no higher ad revenue and command no higher ad prices than other blogs. However, revenues from ads on left-of-center (LOC) blogs are 40% higher than average while their right-of-center (ROC) counterparts’ revenues are 23% less. There are notable exceptions to this general trend, however. While LOC blogs dominate at both the lower (below 100,000) and the upper (above 1 million) ends of the weekly page views continuum, ROC blogs earn much more in the middle territory. Potential explanations for this difference, along with graphs, tables, statistical analyses, and a discussion of the other results, can be found in the full report.
PS: I welcome any and all feedback and comments on these results.
Comments
We have been tracking consumer acceptance of advertising in different media for nearly 20 years.
The latest: Blogs are trusted more than daily newspapers or network TV; consumers trust ads that appear in media they trust.
Americans' views about main-stream media Katrina coverage, for example, stated positively early in the crisis and faded over the next weeks. Blogs became the most trusted among major information sources.
Feel free to Email us for two Excel summary spreadsheets detailing the findings. Art@cnwmr.com
ArtemusS
Posted by: Art Spinella | November 14, 2005 11:32 PM
Interesting study. Hugh Hewitt has long complained that Instapundit charges too little for his blogads; maybe he's holding down the right of center blogs revenues? I also note that the lefty bloggers are much more likely to have ads for political candidates and often run fundraising drives, which may create a feedback loop--advertising on Kos leads to fundraising by Kos, leads to more advertising on Kos.
Posted by: Brainster | November 16, 2005 10:56 PM