In the interest of sharing as much data–and, looking ahead, projections–on the state of the online advertising market with our readers as possible, here are two differing viewpoints, and some historical data that might shed some light on how a recovery would look.
In the optimist camp, we have Geoff Ramsey, CEO & founder of eMarketer, who says that online ad spend will continue to enjoy double-digit growth through 2009. Relying on data from the first half of the year, showing 15.2% growth according to the IAB, Ramsey maintains that the most recent downturn in financial markets will do little to disturb this trend. Several analysts quoted were bearish on online advertising, but several continued to contend that performance-based online advertising (contextual) would be one of the “safe harbors” that would avoid cuts as the recession trims corporate budgets. Ramsey gives 7 reasons why online advertising will weather the downturn better than other advertising options:
- greater measurability of response
- more granular targeting
- higher engagement with consumer
- increasing time of Internet usage at the expense of more traditional media
- deeper interactivity with consumers
- following online conversations gives marketers insights into consumer behavior, desires, feelings, etc.
- access to consumers at all stages of the buying cycle
With a more pessimistic view, Om Malik of GigaOm, points to the implosion of ad networks as evidence of a weakening of the online advertising market. Clients are squeezing their ad agencies, agencies are squeezing their networks, driving margins down and forcing smaller networks out of the market. While participating in ad exchanges can help networks with boosting their volume, the relationships networks have with agencies and clients, and their ability to maintain their relationship through tighter margins and technologically-sophisticated delivery options, will separate the wheat from the chaff.
Finally, it might be useful to take a look at an analogous period in recent history, namely the demise of Web 1.0 and the brunt borne by ad revenues then. That said, taking a look back assumes that we are indeed headed for an advertising downturn and instead suggests its duration and time before growth returns:
Keep in mind a few things before applying yesterday’s lessons to today’s:
- Web 1.0 was more e-commerce- and subscription-dependent than advertising-dependent
- the current macroeconomic meltdown might be larger than that of 2001
- the online advertising market is far more complex nowadays, with a wide proliferation of advertising formats, technologies, and revenue models that simply didn’t exist during Web 1.0, in which CPM display ads almost completely dominated
- Web 1.0 was pre-Google; search has revolutionized internet advertising, spawning contextual advertising
- people spend far more time online than they did 7 years ago
Although we all hope for the best, it’s always best to prepare for the worst and plan accordingly. A changed online advertising landscape might provide the keys to staving off the downturn the first go-around—the chart above demonstrates that it took almost three years for the online advertising market to recover, a painful reminder of the changing tide of fortunes in this space.
This entry was posted on Wednesday, October 29th, 2008 at 5:33 pm and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.