The Wall Street Journal posted a 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!