Firefox good or bad for ad click rates?

German online advertising company Adtech reported that Firefox users click on fewer ads than Internet Explorer users. In aggregate, 0.11% of Firefox users clicked on ads, versus 0.5% of IE users. (Info via this CNET story.) This is potentially worrying for Internet advertising (including search) companies and their investors, because Firefox is taking market share from IE. So what's happening?

Firefox has an integrated pop-up blocker, as does IE version 6 with Windows XP Service Pack 2. But other versions of IE don't. As a result, clicks on pop-up ads are much lower (like.. zero) with Firefox than with IE. David Hallowell, a Mozilla contributor cited in the CNET story, thinks that IE users inadvertantly click on pop-ups, whereas Firefox users actually have higher click rates on contextual ads than users of IE.

However, an article on Open Source points out that Firefox allows users to block images as well as pop-ups. Moreover, a downloadable extension, Adblock, allows users to specify filters to remove unwanted content (ads) based on the source-address. For example: all content from Doubleclick. Adblock also allows users to block Google contextual ads, but Open Source says "it is not recommended as it distorts the layout of the webpage in most of the cases".

My gut feeling is that ad blocking technology will force advertisers to provide ads that people actually want to see. Contextual advertising, which is relevant to the content being viewed, will probably gain share; branding advertising may be in for a rougher ride.

Initial thoughts on stock implications:
(1) The elimination of pop-up ads may drive advertisers to contextual ads provided by Google and Overture (Yahoo). If Firefox results in higher click rates on contextual ads, Google and Yahoo could therefore actually benefit.
(2) Pop-up ads are known to be highly cost effective for advertisers. Eliminating pop-up ads will therefore raise advertising costs for the less scrupulous advertisers who currently use pop-ups. Incrementally negative for e-commerce companies that buy pop-up ads.
(3) Firefox's superior ad blocking technology could hurt the providers of banner ad networks, including Doubleclick and Aquantive.

Posted by David Jackson on January 03, 2005 at 03:57 PM in ticker: AQNT, ticker: DCLK, ticker: GOOG, ticker: YHOO | Permalink | Comments (0) | TrackBack

Business Week says invest in Internet advertising stocks

Business Week's Where to Invest in 2005 issue recommends companies that will benefit from a surge in Internet advertising next year. It names Internet advertising agencies which include, according to BW, aQuantive and ValueClick, plus women's content publisher iVillage. It claims that Infospace is a play on the growth of local ads, and Doubleclick is a "restructuring play".

Interesting to note the stocks BW could have mentioned in this space but didn't, such as content publishers CNET and TSCM. Looks like BW chose stocks that haven't run up too much, and for that reason also avoided the search stocks. But you could argue that if AQNT, DCLK, VCLK, and IVIL couldn't do well during the recent boom in Internet advertising, that suggests that their competitive positions or business models are flawed. And is VCLK really an advertising agency?

Full disclosure: At the time of writing I'm short CNET and TSCM.

Posted by David Jackson on December 20, 2004 at 01:01 PM in Themes, ticker: AQNT, ticker: CNET, ticker: DCLK, ticker: INSP, ticker: IVIL, ticker: TSCM, ticker: VCLK | Permalink | Comments (0) | TrackBack