Gap Widens in Online Advertising

The following article, which talks about the decrease spending on display (banner) advertising, appeared in the WSJ.com today. What this article indicates is that, in a tighter economy, markters and agencies are moving their display advertising dollars over to search advertising - a presumably safer and much more measurable channel. Assuming that there is some truth to this claim, what does that mean for companies like Google, Microsoft, and WPP who spent billions last year fighting over and eventually purchaing some of the leaders in the display marketing space? As the display business takes a hit, which this article indicates, DoubleClick is not necessarily worth as much now as it did a year ago. One may argue that they are a good hedge for future pendulum swings in advertising purchasing, but how much of a hedge? DoubleClick's revenues are a drop in the bucket compared to those of Google, so how much of a diversification in earnings will the $3 billion investment be? 

The article is certainly right about one thing, technologies like DoubleClick's AdExchange aren't seeing the adoption rates that everyone hoped. It appears that marketers are too fascinated and knee deep in analytics and reports to start looking at other technologies. That is, optimization of current online efforts seems to take precedence. And with the huge amounts of data available today, these same marketers may be preoccupied with this optimization for  years to come.

Spending on Internet advertising is climbing at a healthy clip -- rising 20% in the U.S. in the second quarter -- and growth forecasts are strong despite the weak economy. But that growth isn't being enjoyed by everyone.

The gap is widening between spending on simple search ads, Google Inc.'s core turf, and spending on flashier display ads, which companies such as Yahoo Inc. and Microsoft Corp. had hoped to use to gain ground on Google.

Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ...(source)

Labels: Online Advertising Trends