This being the week of ad:tech, news of online advertising has dominated the conversation: from MySpace’s hyper- targeted ads to Facebook’s new ad system to broadband advertising systems introduced by companies such as AnchorFree. The advertising, of course, is becoming social, mobile, and behavioral.
If you take all this into account, and juxtapose it against the recent eMarketer’s forecast — U.S. online advertising nearly doubling from $21.4 billion in 2007 to $42 billion in 2011, representing about 13 percent of the total ad-spend — what you get is a pretty decent context for the ongoing battle amongst Google (GOOG), Microsoft (MSFT), Yahoo (YHOO), phone & cable companies, wireless carriers, Facebook, MySpace (NWS) and countless other startups.
Of course, it also means that advertising (or marketing messages) are going to be in-your-face, every time you turn around. What is the theoretical limit to our ability to absorb these messages? I just wonder, when, as people-being-marketed-to will we say: Enough! Stop! Or will we?
Address the question of what happens when there is a glut in websites using ads as their sole revenue source.
You’ve got X number of ad’s in the pot, at $.01-$Y each ad click. When does the $Y get so low that the sites can only make pennies, and simply vanish?
Look around, it’s happening…
…maybe selling t-shirts on CafePress will make up the difference? …nahh…
Check this:
http://www.vator.tv/pitch/show/SHOPPING-RECOMMENDATIONS-THAT-PAY
🙂
In Sweden, Internet advertising passed TV advertising for the first time in Q3.
More here: http://businessbydesign.lidne.com/index.php/businessdesign/blog/advertising_internet_bigger_than_tv_in_q3/
Steve Jobs – I agree, it is already happening. The online world cannot escape the laws of supply and demand.
Advertising is a scaling game, even within the context of relevancy and targeted messages. Add this to the fact that people can only visit so many sites in a single day, and will only regularly visit a handful of them (or less), and you’ll see that it is the rare ad-supported site that achieves solid business success.
Even a niche site must aim to be the biggest fish within its niche, if it relies on advertising. Don’t let talk of the long tail fool you.
If in general 9 out of 10 businesses fail, I would argue that the odds for ad-supported web startups are worse, if taking the long view.
Om – There is no way to know what the limit of ad absorption is without experimentation, but as sure as the sun sets, advertisers will exceed it. If they become too overzealous, I’d hate to see the consequences.
BTW, congrats on assembling such a great roster of speakers for NewTeeVee Live next week! I would go but can’t afford it at the moment (recent college dropout, company launching soon, etc.). My only hope is the two-ticket giveaway at TechCrunch. As you can see from my comments there (#13 & #22), there is plenty that I will get out of the event, and plenty that I will contribute.
For those of you who are also broke and interested in going, it’s only fair that I post the link here: http://www.techcrunch.com/2007/11/05/newteevee-live-conference-nov-14/
Hi Om, good question. I think that it depends on the context you are in. People will be reaching a limit to this faster when marketing efforts are slamming you in the face when you aren’t looking for them. So when you are looking at other people’s profiles or updating your own on Facebook (the two main activities there according to studies in the field), I feel there isn’t much value to them and they will either lead to a user being annoyed or simply ignore them. The concept of people becoming brand advocates within Facebook is a tricky one. We all know the situation that a friend recommends something to you as valuable. But in the physical world the context, the gestures, the possibility to discuss it and even disagree upon it makes the recommendation valuable. In the on-line world however, we miss that context and valuable interaction. It makes an “Alex went to Mission Impossible 3 and he really liked it” type of feed message much less valuable to me as a “Facebook friend”. And if I get a lot of those stimuli, it will probably start annoying me making me less of a brand advocate. And lets not forget that the power of Facebook, the network, and the relative ease to mobilise people for a cause, might just backfire on Facebook with SocialAds, Beacons and Insights.
Steve Jobs – I should clarify that just because new sites launch every day, doesn’t necessarily mean that ad revenues per site will fall across the board. What it does mean is that the smallest or weakest will die off, like they always have.
The biggest or strongest can keep growing (translation: YouTube, Facebook, MySpace, etc.). This assumes, of course, that the market potential of the site has not been reached, and ignores economic cycles.
It works the same way on broadcast television. Just because ten new shows are released doesn’t mean that every show experiences a decline in viewers. The most successful shows can continue to enjoy their audience base, while some of the small fish (translation: those in the long tail) will vanish.
I think there are a number of things going on here.
First ad revenue will move online because people are spending more time there, and there is still significant ad time and revenue that can shift form mediums like TV to the web. The people make it attractive to advertisers, the money to publishers.
That said the web has some distinct issues to address – ad density is not as great as say a newspaper, and it does not occupy the entire channel as ads do on radio and TV. Sure it brings interactivity and recommendation but those also come with privacy concerns and in some cases (say Beacon) unproven results.
Web Video will result in profound changes in advertising – and I expect a reappearance of branded entertainment (soaps) and more subtle advertising and recommendations methods such as product placement – because they fit the message right in the content.
The other area that needs to change is the services that link advertisers to web publishers. Sure AdSense is easy to set up – but for publishers it’s a first or last resort – first because it’s so easy and last when they realize the don’t meet the requirements for targeted ad networks whose CPM can be pretty interesting.
To me there is a play for traditional media here – as their strength is selling ads for specific content – Could solve a problem for both publishers and advertisers – as the costs of placing ad on thousands of sites is expensive unless someone specialized and streamlines the process.
Also like Steve I think that sites have to look at, or mix advertising with other services such as eCommerce or subscription if they are going to be viable.
Alexander,
i think you have something here. because i think the physical context is as important today as it has been for thousands of years.
More importantly, i think this reformed “brand marketing/advertising” via friends is soon going to lose meaning if we always recommending something or the other, to each other. What’s the point. Recommendations are only valuable if used judiciously.
Facebook, Google and others will have to keep that in mind going forward.
I’ve deliberately avoided all advertising for my venture capital database.
Having blinking ads while you’re researching something is annoying.
I like the idea of offering a “haven” from the constant barrage of ads. My growing customer base apparently likes it as well.
Since my database is a subscription model and a “walled garden”, I might as well make it a beautiful garden – most ads aren’t exactly eye-candy…
there cannot be enough internet advertising.
its good business for everyone
With every new medium, the pool of dollars doesn’t shrink from the other medium’s spending– it just increases. There are a lot of tools out there to ensure ad agencies are making wise choices and not throwing grenades into a stream. Seeing how no-one ever puts a cap on other traditional mediums, its not fair to limit the internet because let’s face it, the internet and ‘world wide web’ isn’t a new medium now and most businesses are confident their agencies can handle traditional mediums. In America (and parts of France) enough is never enough.
Interesting post. I think that ads are self-correcting, like stock prices, over the long-term. During the first Internet Bubble, there were popups all over the place, but now, we don’t see that as much. Advertising will always be around, and possibly always be a little annoying, but it is fairly resilient: http://fishtrain.com/2007/11/07/the-resiliency-of-online-advertising/
You nailed this one Om. As Americans we escaped England party due to over taxation, and look at our tax system now.
So, we have escaped mainstream media and it’s over advertising/marketing, but where are heading? Back into the frying pan?
I work for an Ad Network and we serve about 200 Million Impressions a Day.
Three words:
AD
BLOCK
PLUS
Advertising on the internet = free internet. Why is that bad again?
I use Ad Block Plus, also. at most I see blinking crap once – then it’s gone. Forever.
I never understood why a freely put up site wanted to intrude on my eyeballs.
I don’t find internet ads distracting or interesting. In fact, I don’t really even notice them except when I have to scroll past one to get to the rest of an article or to the comments section, like on THIS BLOG. I notice you have quite a few ads, do you make money on them? Not from my visit, dear. I didn’t click, won’t click.
Adverting Trend Is Growing In a Very Fast Paced, Google Has Jump On The Ads for the Now and The Future…Online Ads..is In The Cyber Space..For everyone to See…
I believe our “theoretical limit to our ability to absorb these messages” as you say is already, and will continue to be an increasingly big deal.
Though we may not consciously come to an “enough is enough” mindset, users subconsciously filter out ads. It’s hard enough to get a user to read the content I put out in front of them, much less the ads looming overhead.
When compared to traditional advertising it becomes obvious the objective of marketing.
Marketing is not what generates a sale or closes the sale. Marketing in any business is to attract a potential customer.
It is the responsibility of the business, be it bricks and mortar or online to close and complete the sale.
So the question is, will advertising decline? Well to answer that question then simply ask yourself, does your business still need a flow of potential customers?
If there is a replacement for advertising, online or offline, then maybe.
Sure businesses have tighter budgets now, but should they increase their potential customer flow or let it dwindle in times of recession?
Simple answer, never let the customer flows dwindle. Cutting costs and expenses is important when revenue drops, but cutting expenses will not cause revenues to increase. Only increasing customer flow or web traffic will.
Cost per click and Cost Per Action Online Advertising is a wiser investment now more than ever as businesses begin to measure the quality of marketing efforts and the ROI.
Online Advertising with FreeKii.com served over 40 million ads in 2008.