Hi Everyone,

Digg Ads have been live on the site for just over four months now, and I thought it would be a good time to explain them in a little more depth and update folks on how theyre doing.

What are Digg Ads?

Digg Ads are the ads that you see with other stories on the homepage, or just below the story description on a permalink. The placement on the homepage is currently the third story down from the top; DiggAds look and feel just like regular content, but they are marked as Sponsored by [Advertiser Name]. You can Digg or bury them just like any other story but, unlike standard Digging and burying, your feedback affects the price the advertiser pays and how often the ad gets shown. Basically, the more Diggs an ad gets, the less that advertiser will pay overall. This model encourages advertisers to give us great content thats relevant to the community.

How Do Digg Ads Work?

We charge advertisers on a Performance CPC (Cost per Click) basis where the advertiser tells us the most they will pay for a click on the ad, and we charge them a fluctuating rate for that click without ever exceeding their maximum. The exact rate depends on that ads quality score (how many Diggs and buries it has received) and the market rate, which is determined by the DiggAds auction.

The DiggAds Auction:

The DiggAds auction is a complex system designed by some of our math PhDs, but here is a simplified version of how it works: Advertisers tell us the maximum that they want to pay per click by giving us a bid. Each day we take those bids and apply a quality score to them based on how the Digg community likes the ads. Then we figure out how much ad space we have for that day, and we go down the list of ads assigning space to the highest bids and highest quality ads until we run out of room. (If its a first time advertiser, we assign a base score in order to get them started and to elicit feedback from users). In this way an advertiser that invests in quality content can pay less, and an advertiser that has a low quality ad is forced to bid higher. We think this system ultimately leads to better advertisements.

Some feedback so far:

So far, the feedback weve gotten from users has been mostly positive. We have heard from users that they would like to be able to comment on ads, which is on our product roadmap for this year. We have also heard that sometimes users bury ads but then still see them again later – this is often because advertisers test out many variations of the same ad. So, while we never show a user the same exact ad they buried we may show a very similar ad from the same advertiser. Another issue we have noticed is that some advertisers keep their ads live for several weeks, which over time can lead to very high Digg counts. As a user, it is difficult to know if an ad has 2000 Diggs because its great content, or because it has been there for a long time. We plan to create more transparency around the issue of long-lived ads as well as we continue to iterate.

How are the DiggAds doing?

In the first four months, DiggAds has been extraordinarily successful for Digg. From a revenue perspective, things have been great we view this as a positive sign that giving users control over the advertising they see is a good user experience. Advertisers have given us great feedback, and we have seen some big brands make repeat purchases after seeing initial success. One advertiser told us they cancelled all their other campaigns except for DiggAds because it was the only ad platform that worked. Paramount studios credits DiggAds as a major contributor to the success of their campaign to get their movie, Paranormal Activity, released nationwide. One of my favorite brands Threadless has also been very successful – I purchased a Three Keyboard Cat Moon T-shirt through one of their ads so I know they got at least one customer!

Questions or Feedback:

As always, if you have any questions or feedback, please contact us here.

Thanks for reading!

-Bob

Source: about.digg.com