Posted February 17, 2009 2:17 pm by with 5 comments

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The Wall Street Journal posted aplace-your-ad-here-please story that further tells the tale of woe for display ads. I don’t think that the news is shocking to most but what is becoming is a little disconcerting is the consistent trend downward and little hope for a real reversal of fortune in the near future.

Companies like Time Warner’s AOL (no surprise there), Yahoo and the New York Times Co. are suffering from decreased revenue but it’s not correct to blame it all on the economy. What you say? Isn’t that where we place the blame for everything? It’s the economy stupid. We can’t make money in this economy. You’ve heard the all the excuses and blame placing possible and it is mostly blamed on the economy. Seems fitting that on the day that the ginormous stimulus package is signed off on by the President that this mantra would continue.

Hold on. There’s more to this story.

But weak demand is simply highlighting the more fundamental oversupply problem — and pressuring prices. The cost per thousand views of display ads on big Web sites sold through ad networks — rather than sales forces of individual sites, which usually handle premium inventory — fell 54% in the fourth quarter compared with the year earlier, estimates PubMatic, which offers online services to publishers.

With the wealth of content that is out there it appears to be just too much inventory to sell. Advertisers have almost too many options and everyone is getting hurt by it. IAC/Interactive Corp reported a 50% decline in display ad revenues for January. Follow that trend through the year and you are looking a pretty crappy year.

Display advertising accounts for about one third of all online ad spend. If this slice of the Internet pie takes a huge hit due to the perfect storm of bad economic conditions and too much inventory then the entire Internet space will appear shaky. How real is that? Unfortunately, most things relating to economic conditions run on emotion and facts take a back seat thus perception may become reality which may hurt the whole Internet sector including search.

The silver lining is that online spending is just one third of that for TV ad spend. As the shift continues to larger amounts of marketing budgets going online it could help pick up the slack. Sites looking to sell display inventory are praying that this is the case. The trouble is that there is this tiny little issue still of the economy. If necessity is truly the mother of invention it looks like we may be in for some real creative times.

What’s your take on display advertising? Opinions wanted!

  • If only there was a way to make the placements much more valuable to advertisers… to somehow improve their performance and ROI so that we could garner a better asking price. Wait!! What if instead of just shotgunning ads out to whoever, we could customize the delivery so that ads could be matched with people’s demographics or interests? Yes, that would be good for advertisers, publishers, and even consumers! Oh, wait, we can’t do that… We are crippled with fear that big brother is watching us through the 2 way mirror that is the true nature of our monitors and cataloging our every move so as to murder us in our beds at night.

    I mean, wow, do we just not even TRY to connect the dots anymore as a species?

    Terry Howard’s last blog post..Mark Gormley Is The Answer

  • Ad revenues are falling for targeted advertising as well, Terry.

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  • Ad revenues are falling because advertisers are spending less, that’s across the board. I was referring to falling CPMs that the article mentions specifically and suggesting that if you want higher CPMs you need to provide higher value, and more and better targeting is the painfully obvious way to do that. In light of just a few posts back the FCC stomping their feet about limiting the ability and effectiveness of advertisers doing just that, I found it a relevant point to make that we are letting ignorance try to legislate away the solutions to our problems. So I guess the answer is, yes, we are not connecting the dots.

    Terry Howard’s last blog post..Mark Gormley Is The Answer

  • Neeraj Bansal

    Declining revenues are bad news for the networks in the short term, but great news for small- to mid-sized advertisers who wouldn’t have even considered display as part of their marketing mix last year. Gone are the days of $25K minimum spends and limited functionality. Sites like BidPlace SB, AdReady and AdBrite are opening up self-service display to the same targeting and accountability that larger clients have demanded (and benefited from) for years. Display isn’t going to replace search for advertisers in most verticals, but it can be a good low-cost, high-reach complement.