It wasn’t too many months ago that saying online advertising would decline in 2009 was enough to get you laughed at in the blogosphere, mocked on Twitter, and have Eric Schmidt roll his eyes and explain, again, why Google ads were such a better value than traditional media.
Flash forward to this week and the Interactive Advertising Bureau big wigs are predicting whole businesses dependent on online ads could go belly up, and researcher IDC has completely reversed its growth estimates. No longer will online ads grow 10% in 2009, says the firm. IDC now predicts a 5% drop in revenues in the first quarter that could get worse in the second. Fingers crossed for the second half of the year.
The trend is certainly already moving in that direction: Last year the market was growing at 18%. Last quarter it grew a sad .4%. That’s flirting dangerously close to the first quarter-over-quarter drop in online ad sales since the great dot com bust. Suddenly everyone’s bull scenario isn’t double-digit growth; it’s a year that doesn’t tip negative.
How’d everyone get the story so wrong? (Ok, not everyone. Stop waving your hand Henry Blodget, I see you.) Two big assumptions were at work here: One was that online advertising is more actionable and more measurable than advertising in the offline world. The other was this pie chart that Yahoo’s PR department used to love to trot out showing the discrepancy between the amount of time people spend online and the percentage of advertising spend that goes online. “At some point, that has to balance out, right? RIGHT?”
There’s enough truth in these assumptions to ensure that online advertising won’t have nearly as bad of a year as offline advertising. But in this market, that’s like saying a broken leg is better than an amputated one.
Plenty of attendees at this week’s IAB conference pointed out that problems like reliable audience measurement are no closer to being solved than they were during the industry’s last identity crisis in 2001. Some people argue, it’s gotten worse. There was also plenty of worried chatter that desperate times would lead to desperate measures, causing advertisers to play fast and loose with user privacy in an attempt to make a sale.
I have a better idea: How about actually come up with innovative advertising products? Google-aside, I think the Web industry has gotten lazy when it comes to advertising innovation. There’s too much outsourcing to the ad networks and too much of an assumption by the portals and other large properties that gaudy eyeballs will be enough. That’s old media thinking. It’s enough to get ads when times are good, but not necessarily to keep them when times get bad.
A lot of people criticize newspapers for just putting their stories online, the same way they’d dummy them up on the printed page, rather than really utilizing the two-way medium. I think you could argue the same about the way many sites think about display ads. Too often it seems a cat and mouse game where I’m chasing an ad around a page looking for the close button so I can read some content. Sure, maybe I look at your message more than I would in a banner. But it’s also annoyed me enough that I will never buy your product. In many cases, even a back-to-basics approach works better, as I wrote about in my BusinessWeek column today that highlights some of the shockingly high CPM rates that un-high-tech email newsletters are getting.
Like so many things in the recession, it’s ultimately a good sign that marketers are panicked. We might actually see some innovation here.
Sarah,
Nice post. Yes, I truly believe that this downturn will result in some remarkable innovation. Most great companies started in recessions, and when companies can no longer rely on VCs for “revenue” they will be forced to start thinking hard about business models that work.
From India,
Anjali Sen
Sarah,
By the way, how many jobs do you have? Businessweek, Techcrunch, Yahoo Finance … books, blogs, conferences?
It’s hard enough for me with one job and writing a blog on the side!
Anjali Sen
I agree, it’s pretty ridiculous. But it is a recession! Easier to turn down sleep than paying jobs, right? Besides only at TechCrunch for two more days.
For two more days? What happened?
I hope it hasn’t been all the Techcrunch trolls? I know I have been harsh on you on some of your posts, but I hope I have been fair and focused on the arguments you made.
I have read some the other commentators, however, which really I found objectionable as they seemed to focus on personal attacks. (I know, I have personally been subject to racist attacks on TC as well)
Anyways, if that is the reason, don’t do it … don;t let them get to you. Most (if not all) of them are cowards who post under Anonymous. We need more female journalists in Tech.
From India
A fellow sister,
Anjali Sen
“only at TechCrunch for two more days.”
—-THANK GOD
That class on remedial English Composition start on Monday?
To all the anonymous posters,
If you have an objection to a point that Sarah makes, that is fine to argue against that. But just making disparaging remarks while hiding behind an anonymous identity is the height or cowardice.
I have disagreed with posts by Sarah Lacy in the past, but when I did so, I did it under my name and I argued against her ideas, not her as a person.
I certainly hope she is not leaving because you you cowards. At least have the guts to write under your own name.
From India
Anjali Sen
There she goes again… the third world spammer “from India.” Get lost… and get a job!
Agree with Matt – Who the H**l are you?
“she is not leaving because you you cowards”
“you you” cowards? Oh, I know is the “Indian English”
BTW your blog sucks big time!!!!!
Sarah is leaving…. *good* — she should.
Sarah, sorry your Techcrunch gig is almost up, I’ve really enjoyed your articles here. Spot on and fun, trolls be darned. And I was looking forward to you writing soon about this fabulous new start-up from your hometown! C’est la vie…
@Matt
“There she goes again… the third world spammer “from India.” Get lost… and get a job!”
Dude, you have reached the heights of idiocy. Probably, you are disgrace to your fellow country-men. Get well soon.
Peace.
With all the talk of doom and gloom in online advertising, I’d like to say that our online ad network, Kitara Media, is growing dramatically and we are helping web site publishers expand, not contract. We’re adding dozens of web site publishers each week and the ecpms are up, not down, and they are earning more money not less. While there’s less high cpm Q4 agency money, that’s a normal cycle in online advertising. Also, it’s silly to get addicted to that money, it’s not reliable. It’s not all rosy everywhere, but we’re welcoming new publishers and paying on time. Not bad for a world wide depression.”
Could that innovation happen on mobile? iPhone advertising and mobile advertising in general seems to be growing quite steadily month after month.
i think it needs to happen on the web too but because of natural constraints, i think we could see it happen on mobile faster.
“We might actually see some innovation here.”
oh dont you know it. the lets start an ad network cpc party days are over. problem there is only so much innovation to go around. where is the game changer ipone app for business? wouldn’t it have raised its head by now? innovation is at it’s peak and there is little room to spare. innovation and efficiency causes the the internet to get smaller, simpler, more efficient. ladies and gentlemen…. The Internet is Shrinking.
Good point on the lack of innovation in the online add world. It’ll be interesting to see who’s coming up with what to counter the losses.
Online ad world surely needs some major innovation and this might just be the perfect time.
The fact is attention span of users is reducing, ads are seen more as eye sores. On most sites you need to struggle to find meaningful content among a maze of ads.
Advertising is declining in a recession? No way i would have never guessed.
Prime placement in already-valued services is more important than eyeballs. Paying someone to have your restaurant show up in the first few results on “restaurants” queries in map programs and such is so much better and more “modern” than the mute, ubiquitous, and easy-to-ignore banner.
Def agree that getting back to basics is going to be a key part of this downturn. We’re seeing both advertisers and publishers warm up to simple CPM and tenancy buys over the last few months.
Even sophisticated buyers who understand and value day parts, user level targeting, etc are favoring a more straightforward way of doing ad buys.
Reducing the frictions behind buying and selling ad inventory is going to be just as important as improved targeting, etc. There’s a lot more room for innovation in that department than there is in targeting, because there’s not a lot of room left in targeting before you cross blurry privacy lines.
Yeah, don’t forget that compannies are really starting to have to buckle down, put both oars in the water, and put their nose to the grindstone.
Even sophisticated buyers who understand and value day parts, user level targeting, etc
In other words, each of those concepts has turned out to be marketroid wank-speak with no significance whatsoever. You know, where the rubber meets the road.
Can’t we just say that smart companies are making direct deals with sites?
EH, couldn’t agree more… many businesses are getting smarter, approaching sites for direct sales, and getting creative.
Well apparently if you’re a “sophisticated buyer,” you have to also use a bunch of meaningless claptrap to convince people you’re serious. Except when you get “straightforward,” that is.
Funny how nobody who is trying to appear smart about this stuff ever says anything about *why* the simple stuff was overlooked.
“No, I swear, this time it’ll be MAGIC. No, we’re simplifying. Well yeah, I know last week we were getting ’sophisticated,’ but that was another world ago, try to keep up willya? Really, I know what I’m talking about. Can I have my bonus now?”
I guess this means more ads on the right column of TechCrunch, to make up for the lower CPMs.
IMO we are in the beginning, not middle, of what will likely become a modest depression. There simply won’t be enough business happening to grow online ads, even as legacy ad sources fail and die as they should have long ago. Things will get worse as the stimulus money is unlikely to go to many massive online ad campaigns.
Also think you have to be about as hopeful as an Obama speech to think we’ll get ad innovation, which I’d argue went out with the Goto/Overture/Yahoo/Google PPC model that Google keeps refining but probably can’t be beat for several reasons.
Airtight logic, dude. Ever consider market forecasting as a career?
Online advertising as banners or just pay per click isn’t working anymore because there is too much of it!
We all have banner blindness, and if we don’t click on advertising, who else does?
The winners from all this are those who understand that the next generation of internet advertising is all about niche, small but very passionate audience, and selling them the idea of selling the product because they love it so much.
Web 2.0 or whatever is all about feedback and just sticking a moving picture of your product is no longer advertising, its a colourful background!
Eventually, this will be understood by the simplest of advertising execs, but while the idea of advertising is sold to marketing departments as a measurable metric – it isn’t going to happen!
I love all the people talking about how ineffective online advertising is, but that clearly aren’t looking at the data. The medium is effective – display included and a lot of the actual research points to it.
thank you, really, thank you. I’m sick of comments like Oli’s.
Good quality advertising is advertising that sells to people who engage with it. On line advertising, in its current form is about throwing 99% of your money to catch the 1% who click – and the small percentage who buy from there.
advertising works best when everyone believes the message – just look at Obama to see a good advertising campaign!
Do you believe your online ads? I don’t.
However, an email from a friend telling me about something I’m interested in, now that is effective advertising – and that is the social media model.
No pop ups, no banners, no keywords – just trust – anyone do an app that can do trust?
I agree, niche is key. Along with direct sales to small and medium sized businesses who deal within your niche. Today, it is highly difficult for a small or medium sized business to get cost effective display advertising on the Internet.
Advertising industry is going to a recession because the stagnation that contextual advertising created.
Wozad is a startup founded in 2008 that created a revolutionary way to target ads to people’s real life interests.
I invite you to checkout our business plan at
http://investors.wozad.com
Alberto,
I checked out your business plan. $0 to $45 Billion in three years? You guys are hardcore
Go Wozad!!!
Well Mike, thanks for the time you dedicated to us. We are conscious that those numbers might look like crazy but still, our platform has a real value, and it seems most of the people is just not getting it. We do believe that one of the biggest issues of the online advertising today is the way the ads are targeted. Contextual targeting has been a great cash cow, but now that cow is old, too old.
“Most of the people is not getting it”
“Those numbers might look like crazy”
Really!?!
#1 if you were hoping for even a modicum of credibility, don’t post your business plan in a TC comment.
#2. You need to work on your communication skills if you hope to be taken seriously.
Oh well… you is what you is.
David.
Well David, appreciate your jokes about typos and my communication skills. You would be good at cabaret. Just to remark :
#1 i am not nor American, nor English is my mother tongue.
#2 We are not looking for investors here.
The purpose was getting some feedbacks and well, it happened. The problem is that your feedback is not constructive, nor it does contain anything that makes sense.
Anyway, it’s just you expressing yourself, so why not ?
It’s sad that with so much innovation and technology, marketers are addicted to the old world approach – stats!
Website visitors, comments, email opens, CTR, CPM, Tarps (yes TV), are all indicators that enable publishers to sell their space, it’s NOT a meaningful measurement tool for a marketer.
The ultimate and only reliable measurement tool is sales and ‘market research’.
Are sales up? Then maybe we’re doing things right. Or maybe we did something right 3 months ago, and now people are acting on our efforts from back then.
Do people like us more? Market research, both traditional and digital/social media styles will show us what people think of our product or organisation, and maybe that’ll result in more sales.
Getting 1M more visitors to your website doesn’t mean anything. Getting 1000 more sales does.
James, any research I’ve read shows that 50% of banner click throughs are from 6% of internet users, they’re 25-45 and earn less than 40k. So maybe banners are effective, but for what? Click throughs from poor people or building awareness of your product with people that matter?
simon…
the best indicator is when a customer walks in and says i;m here because of coupon abc, or discount 123, or because i saw your ad xyz…
however, for the most part, most of the “advertising” on the web has been structured so the developers can hope to get revenue, based on eyeballs…
i’m convinced that a website for a local college, that has a local sales force, getting the local businesses to advertise on the site, while not generating 10s of millions.. could probably do better than most sites on the web.. however, that kind of direct, in your face, working the phones kind of effort is hard, and it’s not something the vast majority of web advertising businesses are up to…
peace..
your are right clicks don’t matter, the impression does. it is called branding, basic marketing 101 awareness= reach + frequency. most websites are branding vehicles not DR. that is where the problem lies. the internet get no credit for branding.
question: who has ever seen a billboard for a product and immediately gotten off the freeway and purchased said product? (fastfood, gas and hotel ads are exempt from this example) let’s say it is an ad for a car or movie. how many?
I’ll be the number is small. same is true for a banner ad
I’m with Jonas on this. Clicks are obviously critical when it comes to search ads, but for banner ads, the majority are branding experiences, not action-based ads. There’s a ridiculous focus on click-through measurement for banner ads that is absolutely inappropriate for the ads.
Any online banner ad campaign should decide if it’s focused on branding or on acquisition, and then design the campaign and measurement of the campaign appropriately – so many advertisers don’t seem to get this. I see plenty of ads that attempt to get click-through even though there is no compelling immediate end-sale, or where the user is unlikely to abandon their current activity, and the ad fails because it does nothing to give the users a website url or good search keywords to find the advertiser later when the user is more inclined to return. Until advertisers (and agencies are really at fault here too) take the right approach, many banner ads may be underpriced because they are underappreciated.
Hey Norris,
“Clicks are obviously critical when it comes to search ads, but for banner ads, the majority are branding experiences, not action-based ads.”
Having worked with many ad networks I would have to somewhat disagree with this point. A large majority of banner ads that we likely come across are DR and pay out only on performance, thus click thru is of the upmost importance. This does vary depending on publisher content and network of course.
But I do agree with you that it is ultimately the advertiser/agency responsibility to use display advertising in a more effective manner as opposed to throwing blame or discounting its effectiveness altogether.
Brian,
I agree that most banner ads advertisers/agencies attempt to be DR ads, but most placements on the web are not DR placements, but branding placements. Just because an ad is intended to be DR, doesn’t mean it should be. And just because most inventory is sold with a DR campaign in mind, doesn’t mean it should be. There are even highway billboards that are DR billboards, but should they be?
-Norris
We’re just introducing what we think really is a new advertising product that addresses some of the shortcomings you mention. I’d love to show it to you and get your take on it, publicly or privately.
A new advertising product? How new? Do I still have to look at it? Cuz that’s a big shortcoming.
WOW – this is a funny thread. The vast majority of sites that will fail will fail because they were overly optimistic in their revenue projections (cpms) . When money was falling out of the sky any business plan that was ad based projected their ad CPMS 5x what was realistic. These businesses were never going to succeed – they just wernt viable without every single piece magically falling into place. Hell just look at Facebook for examples of this fact.
I’ve been in online advertising since 96′ Went through the boom and the bust and the boom and the bust. Too many ads, too many ad networks, too many ad supported businesses and too many ad sales people showed up in the last few years. There were simply too many people fighting for the limited dollars – combined with an infinite supply of inventory and you have the makings of a bubble.
The sites who have a clear understanding of their audience and sell their own inventory will thrive. Those who either dont understand their audience or rely on ad networks and Google will die. And they should.
The last few years were madness. Every moron with a calculator got into the online ad business. Google fueled a lot of this by making businesses believe that they NEEDED to be online. Most have no place online and they soon discovered that their money was wasted. While those who know the medium and understand the basics of advertising are doing just fine and even thriving.
Great post! I could not agree more. The Google/ad network model has really tarnished the industry and turned consumers off. I mean, if you actually saw relevant advertising online – rather than the same damn dating site – you may actually click through.
Very well said. Can´t agree more.
“Google-aside, I think the Web industry has gotten lazy when it comes to advertising innovation.”
Sarah, what was the last innovative advertising product from Google?
Amen, Ms. Lacy. The future of online advertising isn’t in soul-sucking search. It’s not in display ads that no one cares about. And it’s not in some ridiculous new high-tech widget that no one cares about.
It’s about taking time to think up some really great ideas, and really interesting new ways to market, and doing hard work. Just like it is with offline advertising. It’s no coincidence Crispin makes a lot more money than a direct marketing agency.
So how about web sites weaning themselves off of ad revenue? Anyone ever considered that as an option??
Ad revenue is poorman’s revenue (unless you are Google of course).
Maybe it’s time for ad houses to get more creative, but its also high time for sites to think outside of the ad-box and work out where they can monetize their service.
Frankly its shocking how dependent the majority of websites are reliant on ads being served.
The internet needs to break out of this 20th century “publishing mentality”. Creating internet content (rich / interactive media) is NOT THE SAME AS PUBLISHING therefore if you rub your brain cells together for a while and warm up a bit you’ll realize that you shouldn’t be relying on advertising to feed you..
The lack of business model innovation is the elephant in the room of web 2.0. As far as I can think the only advertising innovation on the web has been search marketing, every other model is just transposing old media models to a new technology. CPMs will fall and continue to fall because they are extremely crude.
Did I hear – Elephant in the room?
An innovative business model might require that a REAL product gets sold at a profit to provide the monetizing for Web 2.0. After product commissions, let the advertising become the bejeweling on the elephant.
Selling goods online is the elephant food and then advertising makes a pachyderm look that much better.
Social media just needs a tool that combines selling stuff with talking about stuff.
Well recession only helps rationalise anything that is an excess in the online ad space. This should see a rate cuts and a realistic view of the situation.
It getting down wait for the right swing to rise up,innovation will be needed and more young entrepreneur is emerge in the rescission and world become welcome more into innovation and breakthrough,I notice that advertising downturn also happen at this blog,Previously I dont see techcrunch has no adsense inside but now, it is welcome again this is good for me ,cause when I see techcrunch believe at adsense I know what should I do now to trust into advertising networks
Much has been said about mobile ads innovations, but I personally believe it won’t work long. When using phones, privacy has more requirements than when just regularly surfing, and mobile ads just don’t meet my privacy requirements.
As for web based advertising solutions, http://blogupp.com has drawn my attention through its approach, and to me it seems it might work.
nice plug for yet another “traffic sharing” widget
Is there a TechCrunch policy that states you’re not allowed to utter the Dark Lord’s name, even when he predicted all of this nearly six months ago?
Yahoo wasn’t the only one trotting out the chart showing time spent by medium. Only problem was is that no one was questioning the validity of the chart. Nielsen and TNS, who measure advertising spending, woefully under measure online advertising relative to offline–more than half is missed. That doesn’t include search spending which they don’t measure at all!
Secondly, dollars are not impact. I my spending online, relative to my objectives, is significantly lower, then I don’t have to spend as much.
Thirdly, no media planner in their right mind would allocate media budget strictly base on (questionable) time spent numbers. What about communications objectives? Ask yourself, is each medium interchangeable with the next? I think not.
So you have media selection that change based on the communications tasks that vary with the marketer’s objectives and with the target audience behavior–not based on a pie chart from any one of the internet companies that trot it out, visually or verbally!
Get real!
Ever wonder who still clicks on online ads?
Do you click on online ads?
Do you?
Probably not.
Read “The natural born clickers” (Feb 2008)
http://tinyurl.com/2rw8rr
6% of the Internet population generates 50% of the clicks.
Maybe time to rethink online advertising all together.
Of course we have a different solution.
I personally do not trust the study you linked to. Do you know why people don’t click anymore on ads ? because their content is ridicolous, and it’s getting more and more ridicolous as the time passes. Contextual targeting is ubiquitous but it’s becoming useless.
I also invite you to check out our business plan, as per my previous comment. I think it will give you an useful insight on the problem.
No problem.
Just like people zap away commercial breaks, people avoid online ads.
The world is big enough to offer all kinds of possibilities to companies.
Well, TV commercial ads are also not targeted, that’s why they get zapped.
Well here in the real world businesses are cutting their ad budgets across the board. All this talk of recession-proof online advertising is much like the dot com boom way back.
The truth is that businesses cut their online ad budgets BECAUSE they can track sales from them efficiently – and they see that no matter how much they spend consumers are just not buying.
So you can quickly tell how much money you are wasting – and then you stop wasting it.
All this talk of advertising through a recession so that you can pickup customers when the economy grows does not apply. You can turn your ads on again in moments. You don’t have to book creatives or buying ad/air time.
So as for the analysts – try living in the real world and ask real businesses what they are doing before making rash pronouncements.
I think basic assumption still holds but overall demand of good fall. The online advertising big houses are getting lazy as well:
http://www.weal...vertising-fall/
Great post ; nothing better than buyers looking for products, that´s why search marketing rocks !
saludos,
mariano.
It seemed like people took online ad innovation as integrating flash ads that enabled animated overlays. The kind that you have to chase around the screen as you mentioned. I agree that that is not innovation and I look forward to seeing what new things come out of this recession.
I agree in terms that marketers have always thought of advertising as just buying ads of different mediums to spend their ad budget. I think we’re headed for a shift in thinking which requires marketers to role up their sleeves and figure out ways to productively contribute to the demographic they are targeting in order to win customers.
@Mallory – February 25th, 2009 at 8:27 pm PST wrote:
“Agree with Matt – Who the H**l are you?
“she is not leaving because you you cowards”
“you you” cowards? Oh, I know is the “Indian English”
BTW your blog sucks big time!!!!!
Sarah is leaving…. *good* — she should.”
Why are you nitpicking on a typo? You have made one as well! Did you forget your “American English”??
BTW, if her blog sucks then don’t visit it dude… There’s always “Close” button in the browser.
Don’t believe everything that you read. The AdAge article didn’t fully capture the upbeat mood of the IAB conference. While other trade associations are canceling their annual meetings (MPA, Outdoor Association) or cutting them back (4A’s, WOMMA), there was a very positive feeling about the industry’s future short and long term. Sure there are challenges related to measurement simplicity, reducing the complexity and friction in the pre/post buying, fighting bad government and data ownership, we will evolve and prosper in the face of declines in traditional media. And at the top of the IAB’s list is building the branding power of the medium beyond the default direct-response paradigm that invites creative innovation. Innovative ad products that leverage the interactive capabilities of the medium are important, and we have a number of issues to deal with, but the industry is quite upbeat. And there are plenty of ad startups that have some great innovative ideas.
I totally agree with Rich about innovative ideas. Just take a look at http://visualdna.com/ (imagini a uk company). These types of companies are headed for true success in a down market
“Google-aside, I think the Web industry has gotten lazy when it comes to advertising innovation.”
huh??
Online Advertising… not doing so well… Video Commerce and online DRTV? 2009 will be the breakout year.
This, on a blog that has at least 11 above-the-fold ads.
If it’s true that we’ll see a 5% drop (big IF), I’ll still take that over the drops that other industries are seeing.
We will come up with a new targeting technology soon! It is definitley time to do that!
Good article – it’s true tough times promote innovation – and not just innovation but that which actually delivers results – engagement, brand lift etc. The economy isn’t changing the fate of the businesses that don’t survive, it’s just accelerating the lifecycle. Investors are less willing to sit back when little progress is made.
I do think it’s time for companies to stop focusing on trying to make low-value inventory valuable, but to shaking up the definition of inventory and impact completely.
Ok… let’s talk about innovations… more ad products… like what, which kind, which ones? Which online/digital marketing opportunities will the dollars go?
Mobile, social, interactive ad units, rich media, email… call me curious.
It all comes down to how well you know how to make money. Everyone is complaining about how facebook doesnt have a business plan, but they are ranking in hundreds of thousands daily from their ads on the site!
actually pay attention to the keywords related to recession. I think the CPC of these keywords will rise this year
http://www.weal...nrelated-terms/
I really think Sarah have a good point. Advertising industry has a estagnation… Reaaly good article at Advertising Age; Downturn opportunity. Hope the “crisis” teach something.
Regards!
Check out http://myspace.com/blipd the new flash video tool for creating your own sharable interactive flash video ads overlays for your page, profile, site or blog.
It’s free, you control and choose your own ads plus video measurement is built-in. Works with your current video without requiring a new uploaded video.
Youtube and Myspace compatible for Products, Brands, Music, Artists and Band promotion! Spread the word and tell all your friends you’ve got Blip’d!
Please hire a proofreader. I try to avoid reading TechCrunch but it’s like trying to go through life without ever hearing somebody say anything about a celebrity. Please just hire a proofreader. They’re not even expensive.