Online ad growth to continue
NEW YORK (AP) - February 5, 2008 Originally valued at $44.6 billion and worth about $40 billion
based on Tuesday's closing prices, the bid is a bold statement on
the promise of online advertising.
"Forty-four billion dollars is a great testimonial to the great
power of this marketplace," said Jarvis Coffin, chief executive of
advertising distributor Burst Media Corp. "The market is saying,
`I don't think we're in a bubble. We're in a period of intense
growth that's going to continue to grow for more years."'
According to the Interactive Advertising Bureau, U.S. online ad
spending grew about 25 percent through the first three quarters of
last year, compared with the same period in 2006. Growth is steady
in terms of dollars, though the growth rate is slowing as the size
of the pie gets larger.
And there's room for a lot more growth, analysts say,
considering that by most accounts, the Internet accounts for less
than 10 percent of all U.S. ad spending but more than 20 percent of
the time Americans spend consuming media.
Ad spending on television - roughly 40 percent of the total - is
about even with its consumption time. But the share of ad spending
in newspapers and magazines exceeds their consumption time, said
Elias Plishner, senior vice president for digital communications at
the Universal McCann ad agency.
Thus, the Internet is likely to continue taking dollars from
newspapers and magazines - even more so if an economic downturn
reduces overall ad spending. Some spending might even shift from
television if the writers strike continues and viewers start
fleeing.
In addition, the Internet offers advertisers more tools than
other media to track the performance of their spending, and
technical improvements are leading to better targeting and thus
higher fees.
"Let's assume a worst-case scenario, a decline in the number of
advertisers," said Daniel Taylor, senior analyst at the Yankee
Group. "They are willing to spend more because they are getting
better responses. Revenue in the (online) industry is still likely
going to go up."
And that growth is bound to happen regardless of whether
Microsoft and Yahoo combine or stay independent, analysts say.
"I don't see how Microsoft and Yahoo coming together changes
the landscape that dramatically for advertisers," said Sarah Fay,
chief executive of the Carat ad agency. "There's still enough
competition in the marketplace."
Advertisers can now buy ads from Google, Microsoft, Yahoo or
Time Warner Inc.'s AOL for display on those companies' own sites or
an affiliate's. Advertisers also can buy directly from a Web site
like The New York Times or across a smaller group of sites like
those from Conde Nast or Scripps Networks.
A Microsoft-Yahoo deal could shift money away from Google if
advertisers no longer associate lucrative text-based keyword ads
only with Google, said Chuck Richard, lead analyst at market
research firm Outsell Inc.
"It suddenly wakes people up, `Oh, Microsoft does
advertising,"' Richard said. "To me the goal is to make this Coke
vs. Pepsi. Right now it's Coke vs. go thirsty. It's either Google
or nothing."
Microsoft and Yahoo might succeed in bringing various ad formats
and platforms under one roof, making it easier for advertisers to
spend their dollars, said David Hallerman, a senior analyst with
the research group eMarketer.
Even Google doesn't have that - at least not until it wins
European regulatory approval to buy DoubleClick Inc. and integrates
the online ad distributor's technologies. Google is relatively weak
in display advertising and behavioral targeting - ads tied to
surfing patterns rather than keywords. Yahoo and others have long
been doing both.
Jonathan Sackett, chief digital officer with the Arnold
Worldwide ad agency, said Microsoft is strong with desktop software
and Yahoo in Web and mobile services. If somehow they could make
all those platforms seamless, he said, advertisers could better
reach consumers at the right time - such as through their cell
phones while they're watching television.
But he said that will take time and money to marry the three
screens - without any guarantee of success.
And that lag may render a combined Microsoft and Yahoo no more
than an asterisk as the overall industry grows.
"You could argue whether or not Microsoft is putting too much
hope into Yahoo," said Bob Davis, managing general partner of
venture capital firm Highland Capital Partners. "I don't think you
can put too much hope into whether there's too much in online
advertising. We can debate and postulate about how fast it will
grow but it will grow."
(Copyright 2008 by The Associated Press. All Rights Reserved.)