Here’s a great post by B.L. Ochman from the Marketingprofs website. It really explains where online advertising is heading and if your blog ads are even optimized properly.

Blog advertising expenditures have grown 300% in the past year, according to Henry Copeland, president of blogads.com, and blog advertising is still obscenely cheap. In fact, companies can make a really big brand splash for $25-$75K.

Blogs provide advertisers an excellent opportunity to reach a devoted audience niche. Nonetheless, a new American Advertising Federation study on “Digital Media Trends” reports that 58% of “advertising industry leaders” said that they personally are “struggling simply to manage existing online efforts, let alone stay ahead of the curve.”

And, while blogs’ impact is magnified because they reach influencers, blog numbers, until recently, have been little more than curiosities to big brands.

I predict that the cost of blog advertising will rise exponentially in the next 6-12 months. And, as traditional advertisers try a heavy-handed approach to creative, many companies will skulk away, having convinced themselves that this newfangled social media doesn’t work.

Although every publication on the planet seems to have run at least one article about blogs, the first question I am asked in every time I talk about social media at conference is still, “But do blogs really work for corporations?” Pretty soon, communicators who don’t know the answer will be asking, “Would you like fries with that?”

It’s not their eyeballs, it’s their mouths

With click-through rates in traditional online advertising dropping, inexpensive blog click-throughs are as high as 1%. Advertisers are starting to appreciate the influencer constituency on blogs, where the distinct advertising value of these audiences “isn’t their eyeballs, it’s their mouths,” Copeland says.

Successful blogs are edgy, have a sense of humor, and are recognized experts in a narrow niche. Blog audiences look at traditional ads, like “Click here, get 20% off,” and say “screw this, I’ve seen it everywhere,” Copeland says.

A flood of book, TV, movie, and music advertisers are spending money on blog advertising, Copeland says, and automakers have also caught the wave. While most blog advertising is now aimed at consumers, there’s huge opportunity for B2B because many of the blogs with the largest audiences are business-focused.

With a mere $23K, I was able to generate a 0.857% click-through rate on ads on 177 blogs for Up Your Budget I, the campaign I created for Budget Car Rental last fall, at an average cost per click of only 3 cents. Audi’s viral marketing campaign, Art of the Heist, generated 85% of its traffic with the 15% of the overall budget it spent on blog advertising, according to a member of the creative team who spoke at an online ad conference last fall.

Average blog ad buy up 300% over last year

A flood of book, TV, movie, and music advertisers are advertising on blogs, and auto companies have also caught the bug, Copeland says, with the average buy up more than 300% over last year.

If you think blogs are not a viable ad medium, consider this: Many blogs are achieving “big media” reach. The celebrity gossip blog Perez Hilton, for example, or DailyKos have 500,000 readers a day, which is a quite a “big media” reach.

A 2005 Blogads survey of blog readers showed that certain niches (like politics) have a median age of 45 and median income of $85,000, and a high level of C-level executives.

Copeland reports that Blogads CPMs are still relatively low: $0.50 to $3.00. Banners are going for $10-$15. Average cost per click is $1.50. Some campaigns are down at 3 cents while some are at $10. “Good creative and quality of audience cohort makes a huge difference,” he says.

Running traditional ads on blogs is a formula for failure

There are several blog networks, including Federated Media, publishers of BoingBoing, the second most popular blog in the world according to Technorati. It reaches several million readers and RSS feed subscribers a month, with CPMs averaging $5.

Running traditional advertising on blogs is a good formula for failure. Blogs are based on niches and communities and it is counter-productive to run generic ads on blogs. Blogs are fundamentally about links, so multiple links in ads are vital.

“Folks are beginning to loosen up and realize that they can’t run the same creative across all media,” Copeland says.

Copeland offers the following guidelines for effective blog ads:

While only about 5% of blog ads use video now, the percentage is likely to grow because giving people the sense that they will see something cool when they click is important. However, advertisers shouldn’t get too focused on shimmering, jittering images, Copeland says, because they’re distracting.

How much do you have to spend to do an effective campaign on blogs?

Remarkably little, considering the possible results. “It depends on what you are after,” Copeland says. “If you want to make big brand splash, you should spend $25 to $75K. If you have a very creative/viral approach or want to target a specific sub category of tastemakers, you can spend $5 to $10K.”

In other words, you can create a blog advertising campaign that will have great impact for less than the cost of a single ad in a national print magazine.

Agencies have begun to play a much bigger role in blog ad buying than a year ago, but a lot of the creative flops because agencies are not grasping the renegade atmosphere of blog communities.

What’s next?

Copeland predicts:

• We’ll see an increased reliance on “people-powered marketing,” which is to say stuff like the Mentos/Coke fountains on YouTube that give an incredible boost to certain products.
• You’ll see studios buy ads to promote mashups that their viewers have done.
• You’ll see voters doing ads for their favorite candidates, with candidates turning around and paying for air time for those same ads.

One thing’s clear: No company, organization, or association or media buyer can afford to ignore blogs any longer. Early adopters have taken the lead, and blogs finally entering corporate consciousness. What are you waiting for?

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