Thursday, May 20, 2010

Online Ad Revenue Set to Explode, As Marketers Struggle With Complexity Who Wins?

Facebook, LinkedIn, AdWords, countless networks, and now Twitter. These are just a few of the major online advertising platforms agencies, marketers, and entrepreneurs are budgeting for in 2010 and 2011. According to Nikesh Arora, Google's president of global sales, the budget allocated to online advertising is about to skyrocket.

I agree.

In an age where traditional media is in the throes of a long and painful death and more of the world spends time online Mr. Arora's estimates are well taken. He states,

"People are shifting their spending dollars more and more to the online world – whether it be direct marketing, or advertising, or branding. And that follows industrial marketing logic which is that you have to go where the eyeballs are, where the customers are.

The next big wave will be consumers consuming more and more video on the web, and you will see more and more brand advertising and display advertising move to the web."

There's just one problem: Most marketers don't understand online ad technology.

I'll admit - I have a lot to learn, but based on some impromptu research of major North American Brands marketers have a long way to go. Take this statement as an opinion only for now; I'm not prepared to present the hard facts on what's out there.

All things considered, here's my prediction of who will cash in and why:

Twitter: the hugely popular microblogging service is about to unleash it's ad platform. I think the concept is simple enough that marketers will flock to the service... at least in the beginning. From a long term viability standpoint I don't see Twitter generating the kind of revenue it needs to be profitable from ad sales. Not to be a pessimist, but I have witnessed the decline of Twitter in the consumer marketplace, and I can't imagine a future where inundating consumers with sponsored Tweets and ads will make the service more palatable.

Facebook: the world's most popular social network has visions of becoming bigger still, and in order to accomplish Facebook's goal of going public (trust me - this IS a priority no matter what Facebook is saying publicly) they are going to have to have some serious revenue on the books. Ad sales are going to make up a big part of this, and I think the next big wave on online ad spending will see Facebook cleaning up as it expands it's semantic web approach. The "Like" button, among other widgets and games will increase the importance of Facebook - and it's value to advertisers.

Ad Networks: though Facebook will get a healthy bump in revenue from selling advertising, it will be dwarfed by the increase in sales through ad networks. As semantic, geo, and behavioral targeting become more refined (and more intrusive) expect the immediate benefits to be irresistible to advertisers looking to squeeze more out of an already reduced budget (raise your hand if you had a healthy increase in your marketing budget over the last 2 years... Beuller? Anyone?).

Video Services: YouTube and others will reap big benefits in online ad revenue from a sharp increase in online video viewing.

What other trends are you observing in the online ad space?

Nick Kinports (follow him on Twitter @ADMAVEN) has worked in the interactive technology world for over 9 years, and helps the Fortune 100 identify unmet consumer needs, create ideas to fill those needs, and bring them into market. He currently works at Maddock Douglas.
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