Aplus.net Blog

Yesterday, the New York Times ran in interesting article detailing some of the changes the world of Internet advertising is undergoing thanks to the current economic slowdown.

Granted, Internet advertising is already a very dynamic force, something that evolves and adjusts on an almost daily basis. But, at the same time, as it becomes a larger and larger part of the American economy, it tends to stabilize into something predictable (and therefore, reliable). In other words, as more and more money is put into it, the less dynamic it tends to be; investors want results, not uncertainty.

So even though the Internet advertising industry is thriving like never before (it was a $21 billion industry in 2007, according to the article), there are some big changes underfoot. Anyone in the online business game should be aware of the current evolution the industry is facing.

Last year, [Tyler] Townsend, [a digital media manager] said, many clients were happy to spend money just to raise awareness. Since January, however, “everyone’s retail-oriented. They want as many clicks for the dollar as possible,” he said.

So far, the threat of a recession has not slowed the migration of ad dollars to the Internet — as Google’s strong results showed on Thursday, when it reported a 30 percent jump in net income for its first quarter. But as Mr. Townsend’s campaign suggests, the slowing economy might be changing where those ad dollars are being spent.

Increasingly, marketers are looking to ad networks, which sell display advertising across groups of Web sites. Some networks offer targeted advertising; others, called vertical ad networks, include sites that focus on one subject, like travel or sports.

Their growth could mean a lower share of advertising for portals like AOL and particularly for Yahoo, which is particularly strong in traditional display advertising. (Yahoo will report its quarterly earnings on Tuesday.)

In 2007, United States revenue growth slowed at three of the four major portals (Yahoo, AOL and Google) according to an analysis by eMarketer. The fourth is MSN. Any downturn could also be bad news for media sites that attract a lot of display advertising, like CNN.com or nytimes.com, at premium rates.

In the United States, $21.1 billion was spent on online advertising last year, up from $16.9 billion in 2006, according to eMarketer. Search advertising — Google’s stronghold — is the majority of that spending, according to Jeffrey Lindsay, an analyst at Sanford Bernstein.

… The reasons ad networks are thriving are price and improved technology. Ad networks charge much lower cost per thousand ads served (known as CPMs), as low as $4 on an ad network with some targeting, compared with $40 and up for some ads on premium sites like MSN or Yahoo.

“While the home pages are still very effective media buys, the price tags on them have become a little outrageous for many advertisers. For all the growth that has gone on from a site standpoint, there are other ways to amass that type of audience fairly quickly that are more efficient,” said Margaret Clerkin, the chief executive of Mindshare Interaction, a media-buying firm.

Click here to read “A Web Shift in the Way Advertisers Seek Clicks” by Stephanie Clifford.