The Ad Model Will Prevail
January, 2009
The online ad model is taking a pounding because some of the major names in the biz are not hitting their numbers and CPMs–and other metrics with which to make money–are plummeting.Here’s the prediction: It will dip for a while and then climb–fast. And here’s why:
1. The current dip comes from these sources and, if you ponder them for a bit, you will see that they reinforce each other:
Source One: The contaminated economy in general.
Source Two: The te3rrible ad-spend market, related to the lousy track record of large media companies in hitting their numbers. (And in particular, companies with a big Internet or mobile play)
Source Three: Advertisers still “don’t get the web.” (OK, let’s expand our brains and start saying something like: “Advertisers don’t get the digital platforms.”)
So, you have the ad people unwilling to stick out their necks: What they really want to do is preserve their jobs while all around them are losing their heads.
2. The upside?
2.1 (love this numbering system, huh?): The reach per dollar spent is pretty enormous in the digital markets.
2.2 The demographics are changing–of the ad buyers and ad placement people: They are “digital natives.”
2.3 The production costs are nearly nil.
2.4 You can change ads on the fly and according to market response.
2.5 And the main reason: The granularity of the demographics and the data. It is soooo good (and getting better every day) that people do not know what to do with it.
2009 is one of those transition years–the shift of more money to new media platforms. Ad agencies will look like geniuses because “now they get it.” But, …
It does not follow that this is advice for new investments. A lot of people are not sanguine about start-ups and the ad-driven model. IN other words, the fortunes have been made there. Now it is the spread of the model to the established economy. Advertising needs scale or depth–breadth of audience or depth in a niche audience (which, when you think about it, is really the same thing). Venture capitalists are not looking very closely at startups with the ad-driven model. So even if you think you are the next Google, please be prepared for a lot of rejection.
Please be prepared for a lot more going on in the new media ad world? Digital platform ad world?
And where will that take us with the digital transformation occurring in February????
January, 2009 at 4:04 pm
I’ll reply to my own post to make these comments:
1. The ad model will succeed for those sites that generate a LOT of traffic–either “general” traffic (higher volume but lower CPMs) or that of a rich vertical (lower volume but higher CPMs because it is a valuable vertical).
2. Generating high traffic means creating (and sustaining) a compelling reason to go there and–like the restaurant business–to return (often). Compelling content is one; social networking is another.
3. You need Mindshare–awareness in a sufficiently large portion of the relevant population to support your business model metrics.
4. You need convenience. There may be a better search engine than Google out there but who is willing to load it?