How fast will this happen? Considering that Internet advertising spend still hasn’t reached parity with TV spend after nearly 15 years, mobile will also take a while too. The mobile advertising space is still in its infancy and will require a lot of resources, cooperation, learning, and measurement/analytics to unlock its value.
eMarketer put out a new round of forecasts for the coming new year and beyond.
Display Advertising - Branding is driving growth in display advertising, where online video is they key component with the greatest amount of growth. Overall, Display Advertising growth is outpacing Search. My POV: Online display has a higher upside, representing much greater (& higher growing) amounts of available inventory than search, and the continuing move towards inventory transparency and automated purchasing (via Ad Exchanges, Demand Side Platforms, & Real Time Bidding). Premium online video inventory continues grow giving brand marketers more opportunities to move from traditional media to online.
Search - eMarketer estimates US advertisers will spend $12.37 billion on paid search, compared with $8.88 billion on online display ads. My POV: Search will continue to be the performance leader for most marketers and hence the dollars will continue to flow there. The huge limiting factor are the constraints on search inventory growth.
Local Mobile - Huge growth expected in this area where US local mobile ad revenues are set to increase at a compound annual growth rate (CAGR) of 57% from 2009 through 2014, according to a forecast by BIA/Kelsey. My POV: We are still in the very early stages of the mobile advertising market. Lots of experimental budgets being used to test this medium. What are the tipping points to get Local Mobile down stream towards SMBs? My guess is automated self service marketplaces and better tracking in order to measure ROI. Lot of work still left to do here.
Here’s to another banner new year in online advertising!
For a long time, I’ve been perplexed by the number of businesses on the Web that have sprung up around a free or “freemium” model. These businesses have the potential of creating huge number of users and usage but no clear way of making money.
In this excellent blog post by 37 signals, “The bar set in our industry is too low“, talks about the idea of offering for free and then “hoping and praying” the company will make money later. People in the Web industry have touted, “success based upon future results” is not sustainable unless there is a real business model behind it. Too many times I’ve heard at industry events: We can build a huge audience now and we’ll figure out how to make money later.
The first wave of Facebook apps grew huge audiences but saw their online advertising rates erode due to the fact there wasn’t a lot of intent or enough relevance for advertisers built into the apps being built. The group of savvy second wave of FB app builders borrowed the model of paid virtual goods, popular in Asia, and have built very solid business models. In the meantime first generation FB app companies such as Slide and RockYou, who have seen sky high valuations, have seen their growth stall since it became impossible to reach the lofty expectations set.
Another example, FreeConferenceCall.com offers simply to host free conference calls. We use this service in my line of business every day. Their website’s FAQ states in response to the question, “What’s the catch?”: “There is no catch! There are no advertisements to listen to, no quality issues, no hidden fees, no sales pitches, no contracts, no purchases required, no privacy problems, no limitations or restrictions, and no surprises.” I realize they have the ability to upsell more advanced services such as larger packages or voicemail systems but surely the number of people partaking in the free conference calls dwarf any paying customers. It seems to me their loss leader has more value than their “for pay” services.
Hope and pray is not a new business model solution.
I’ve been following the whole emergence of real time search lately. Very interested to see a whole raft of new entrants emerge to tackle real time search using a variety of techniques. Tweetmeme, for example, is using more of a Digg.com approach. Topsy has an algorithm weighted around authority of the poster. This article on VentureBeat is very interesting in that it gives a great overview of the space.
I did a quick query on Quantcast to see which of these sites have the most amount of traffic:
RT Search Engine Monthly Users
scoopler.com not enough data
topsy.com not enough data
almost.at not enough data
dailyrt.com not enough data
twazzup.com not enough data
collecta.com just launched
Google’s Larry Page has stated publicly this is an area they are weak in currently, though I’ve been noticing more and more inclusion of real time search results lately.
Interesting new article in The New Yorker by Malcom Gladwell (Outliers, The Tipping Point) about How David Beats Goliath. Basically a great article on disruption. The article reminds me of Clayton Christensen’s work on the Innovator’s Dilemma series where upstarts can come into an industry and disrupt well established players. Great stuff for anyone wanting to build a startup.
“…substituting effort for ability turns out to be a winning formula for underdogs in all walks of life…”
Throw out the conventional. If you are building a startup you have to be willing to go above and beyond what is conventional and disrupt your competition.
The main reason we decided to start Permuto was we saw a huge opportunity in online advertising. Online advertising is a critical service which allows millions of publishers, social networks, and other services to provide so many low cost services on the web.
Online advertising is still in its infancy, where the amount of time spent on the Internet is roughly equal to the amount of time spent by the average American watching TV. However, the amount of money being spent on the Internet is roughly a third of TV.
To bridge the gulf the online advertising spend, the challenge for marketers is to innovate and really bring out what is special and unique about this medium while making it scalable in its reach to touch millions of people who utilize the web. The company that unlock this potential will be huge.
The industry is still young. Lots of potential and much opportunity.
There has been a lot of press about the problems at Yahoo! and their 100 day quest to reinvigorate the company. With all this bad press, one has to remember that Yahoo! has:
Huge consumer audience – check
Large advertising base/reach – check
Number of branded websites – check
Recognizable Brand Name – check
In short, Yahoo! has all the assets stacked in their favor to succeed. In the end it really boils down to:
Execution, Execution, Execution!
That’s about it. The only “sacred cow” that needs to be sacrificed by Yahoo! is the slow moving, stagnant, execution killing company culture.
Yahoo! reminds me of the classic movie Rocky 3 where Rocky Balboa has become complacent surrounded by yes men. Rocky’s trainer, Mickey, dies and can no longer protect Rocky. The fierce Clubber Lang (Google, Mr. T in the Movie) beats the living crap out of Rocky. Rocky, through the help of Apollo Creed (played by Steve Jobs), regains his confidence and the “Eye of the Tiger” to learn to fight on his own two feet.
Reinventing (or rediscovering) the company’s killer instinct (Eye of the Tiger) begins and ends with the people @ Yahoo! The way to get it back is to go back to the beginning and remember who Yahoo! really is, focus on the consumer, and (re)learn how to WIN.
Yahoo! just announced tonight that they acquired Blue Lithium for $300M in an all cash deal. This is an excellent move by Yahoo! to pick up one of the leading companies in the performance marketing space. Blue Lithium boasts a data driven targeting platform that is one of the best in the industry. In light of the recent multi-billion dollar acquisitions of Doubleclick ($3.1B – $300M revenue) by Google and aQuantive ($6B – $442M revenue) by Microsoft, this appears to be a excellent deal for Yahoo!
Update: It is estimated by Mashable.com that Blue Lithium’s revenue for 2006 was $100M+, further evidence that this was a good deal for Yahoo!