A dimple in the online ad spending bubble

John Battelle notes on his blog that Yahoo’s stock dropped in response to an announcement by Terry Semel (Yahoo’s CEO) that online advertising growth is slowing down. This slow down is focused on several categories including automotive and financial services and seems to be more display ad oriented than attributed to revenues from Yahoo Search.

I don’t think that this announcement from Yahoo means the search bubble is bursting, or that online advertising (overall) is in jeapardy. Ad spending going down for display advertising is not unexpected - as an online media planner I’ve reallocated a lot of my clients’ budgets to more response-driven tactics than display advertising - and I think that’s what’s happening here to some extent.

This article in the LA Times goes into more detail about the Yahoo announcement, and what it could possibly mean for online marketers, advertisers and publishers alike. I agree with Ken Cassar’s (of Nielsen/Netratings) statement that the Internet is being effected by things that have nothing to do with the Internet. 

I think to some extent - at least where media is concerned - this has always been the case. It stands to reason that if your industry is suffering overall (automotive), you’ll scale back your advertising overall. I wonder if Yahoo is just suffering in the display area with their automotive advertisers or if they are taking a hit in the search marketing arena as well. I also wonder if there are other and possibly cheaper tactics that the automotive industry is doing to replace the media they are no longer buying - like blogging, or writing articles, or PR… 

I think what’s happening here is a mini-shakeout that is completely different than the shakeout of the late 90s and early millenium when we all visited Fucked Company twelve times a day to keep track of the head count (and make sure we weren’t part of it).

What’s happening now is an awakening - to the fact that the Internet isn’t the magic bullet when it comes to media. Sure it’s more targeted, and search marketing is a sweet deal because it’s a response-driven tactic, but at the end of the day it doesn’t matter if someone sees a banner, or clicks on a search ad or even visits your Web site - they must buy your product.

So what may be happening here is that Yahoo and other sites that get a large portion of their revenue from display advertising are feeling the same pinch that offline channels are feeling - people do not want to spend money if there’s a poor ROI.

Sure more companies are going to carve out more media dollars for the online space - the Web is still a relatively new frontier that many companies have yet to truly explore. But these companies will also get savvy, and soon the Web will celebrate its 15th anniversary, and than its 20th and when the college years are over we’re going to know a lot more about what works online than we did five years ago, or three years ago or yesterday.

What then? I think the future in online ad spending has to do with focusing on how we can correctly spend our ad dollars (or our client’s ad dollars) on Internet tactics that tie into their unique goals. Broad banner buys are a thing of the past. Seriously, do they work for anyone? But that’s ok. Really, it is. Because banners are showing up in different ways - through CPA and CPC buys that are more response driven, through e-mail sponsorship to finely targeted lists, as blog ads that combine images with text….I could go on but I will spare you.

I think that Yahoo and the Internet are mutually exclusive (in this instance). That is, Yahoo experiencing a dip in ad sales is not reflective of the entire Internet bubble bursting. It seems like a normal and expected growing pain of online media. I mean, accountability hurts.

Add comment September 20th, 2006