Online ad market stabilises – next period will be interesting

By November 30, 2009Advertising

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This chart showing US online advertising spend offers a glimmer of hope for internet businesses everywhere, but it is too early to call this a trend.

There are some good reasons to be positive right now, alongside the continuing good news on the macro economy I keep hearing stories about the effectiveness of Facebook’s new targeting system and the continued growth in ecommerce can only bode well.

These good news vibes are offset by the following:

  • The overall market is still below Q4 2007 numbers and we have only seen one quarter of improvement
  • We could be on the cusp of a significant shift from paid media to earned media – i.e. away from buying ads to facilitating engagement that results in consumer advocacy

I’m starting to get excited about the potential for startups in this second area.  The next couple of quarters will be interesting both for that and for the market overall.

  • Question is how many companies can be profitable or even sustainable from this 20-25b per year. I wonder how big the cost budgets are for companies trying to make a living from this pot of ad money. Definitely it is in multiples of this total ad revenue income stream. A lot of expectations have been built on hopes of much bigger ad revenues and growth in this area. Either a lot of media and sites and services will go down, or they have to find non-advertising revenue streams which are at least as big as the current ad revenue. I believe the current types of advertising do not have much room for growth in next 3-5 years. There should be opportunities out there for completely new types, either what you described, or at the beginning of marketing tunnel like brand and mass market marketing, or at the end like direct response and action/acquisition phase.

    Of course startups always have to fight for a pot of money where there's not enough for all of them, only the best. Still I have many doubts for sustainability of the current online services ecosystem, if no new income streams can be found.

  • I agree, many purely ad funded businesses will either find some new revenue streams or fail. I'm also seeing a decent number that are getting themselves to profitability at a low revenue level and may sustain themselves at that level.

  • would have been great to put this in front of the trend in the offline advertising market

  • would have been great to put this in front of the trend in the offline advertising market