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As reported by the AP news service, Nielsen/NetRatings, a leading online measurement service, will discontinue ranking web sites based on page views. They will now begin tracking how much actual time visitors spend on web sites.

What effect will this have in the ongoing battle between Internet heavyweights like AOL (TWX), Yahoo (YHOO) and Google (GOOG)?

The following quote describes how this new approach will reorder how these sites are ranked against each other:

Ranking top sites by total minutes instead of page views gives Time Warner Inc.'s AOL a boost, largely because time spent on its popular instant-messaging software now gets counted. AOL ranks first in the United States with 25 billion minutes based on May data, ahead of Yahoo's 20 billion. By page views, AOL would have been sixth. Google, meanwhile, drops to fifth in time spent, primarily because its search engine is focused on giving visitors quick answers and links for going elsewhere. By page views, Google ranks third.

Under the new approach, sites where users play games (Second Life, anyone?) or watch videos will also move up in the rankings since they tend to keep visitors busy on their sites for longer durations.

There has been some discussion on other sites and blogs about the relevance or significance of the new measurement method, variations of which other web traffic measurement companies are also adopting.

My interest is financial. What happens to ad dollars in this new environment? Who gets more and who gets less? Will this new approach chip away at Google's ability to drive prices higher for search advertising keywords? Will it allow Yahoo and AOL to boost revenue by charging more for placement of banner ads?

In the case of Yahoo, this could eventually be a net positive. Yahoo is weaker in search advertising than Google and this will not help it any. Fortunately, Yahoo has some things going for it. Yahoo has enhanced its potential returns from the banner advertising business via their recently announced "smart ads". Yahoo also has more pure content and web properties that cause visitors to linger on the site (did you know that in terms of unique visitors they dominate the online game category?). In combination with these factors, a higher overall site ranking via the new measurement approach might help to boost ad revenues and get Yahoo (which was recently downgraded by ThinkEquity) out of its slump.

As for Google, their purchase of YouTube now looks even smarter. It is known that visitors to YouTube spend considerable time on the site. Naturally, Google is working to place advertising and otherwise monetize the site. The new measurement model should serve to boost YouTube's ranking nicely. Increased ad dollars from YouTube should offset any weakness in the pricing for search advertising keywords that may occur. On the other hand, since advertisers bid on key words, Google may not see any weakness at all. Advertisers know that Google is still the primary site where users go to find products, companies, services, etc. and those vendors want their web pages in front of customers' eyeballs. Google search is often the best way to accomplish that.

Unfortunately for the sites that stand to gain, it will not be an overnight process, as advertisers will need to get used to the new metrics and develop a comfort level that advertising dollars are getting expected ROI based on any new pricing and site ranking data.

Source: Will Nielsen's Net Ranking Changes Impact Online Ad Spending?