Ashkan Karbasfrooshan over at Montreal-based Mojo Supreme is blogging about the forecasted fall in online ad revenue in 2009. He points out that all this talk of an ailing economy will have a multiplier effect on ad rates as media buyers convince themselves that lowballing publishers is the best tactic and publishers scramble to book what they can. Karbasfrooshan's entire blog post is worth a read but here's the kicker - All Things Are Relative: At Least We’re Not in Radio, TV or Print!
If online advertising sentiment is this bad, even if the outcome is half as bad, then imagine what the radio, TV or print outlook is right now. Can you really imagine a media buyer paying $1M - let alone $50M, as Dell balked at - to be in print? What about radio or TV, which represent a black box in advertising where you don’t get to even track or target anything?
Newspapers like NYT and Tribune are - or are at risk to - defaulting right and left. TV companies like CBS are seeing declines in revenues. Radio companies are not faring better.
The point I am making is: there is a bull market somewhere at all times - even these times - and that market is online. It’s time to balance the reporting, too. I find it appalling (alright, strong word) that a site like Tech Crunch inflated the bubble on the way up, and is now ringing the bells of doom in the downturn… but that is publishing… and Tech Crunch does it well.
Who does the doomsday scenario thing best? Henry Blodget. Reading his Alley Insider, you’d think he and his talented staff of writers were typing on a ledge somewhere, choosing between the Publish button and jumping out of the window. For a great piece on his comeback, read this Wired piece. Mind you, in all honesty, I am technically guilty of this as well, the title of this piece should be “Will Online Ads Fall by 50%”, and not “What Happens if Online Ad Revenue Falls by 50% in Q1?” - but when I started writing it, I was thinking more of the impact on print… but then I started to ask myself, can this even really happen?
Well, maybe. At the end of the day, we just saw a major evaporation of wealth throughout 2008 in the housing, financial and automotive sector, to think that online advertising will go on unscathed is foolish, but to alternatively expect a 50% decline in what is the only bright spot in all of marketing is equally foolish.
Thoughts? Where do you think online advertising is headed in 2009?
WatchMojo.com - a wholly-owned subsidiary of the Mojo Supreme Network - is one of the largest producers, publishers and syndicators of video... [more]
This is all kinds of wrong. Pure play banner CPMs will likely fall. Direct negotiated placements in some niches may fall as well. Contextual and CPA storms? No frickin' way.
I talk to dozens of (potential and otherwise) advertisers a week, and they all have one thing in common lately: a fear of where the economy is headed. One thing they don't have? An unwillingness to spend in order to get new business. Unlike radio, print, TV and raw banner placement, most CPC and all CPA is directly tied to revenue. Will things as rosy peach as they are now? Probably not.. but at the end of the day, CPA and CPC will always be a measurable percentage of a sale happening, so long as sales are happening, they'll stay strong.. period.
Ashkan Karbasfrooshan clearly understands that he's fear mongering with this piece. He even feels bad about it. The problem is, the more publishers that accept that this is reality, the more likely networks are to force prices down. I've even started seeing it in the secondary CPC networks where they've halved or even quartered their base rate. In an action game, the price per target is irrelevant; by lowering their minimum, these networks merely cut money out of keeping quality publishers in the game. I'm all for my clients saving money, but at the end of the day without the infrastructure in place, it'll be harder to manage effective campaigns. Let's all take a moment to breathe, and not muck things up due to fear.
Rob, you're right in that everything is relative. Will the bigger players see a contraction? Sure - along with every other industry. A billion dollars today is only relatively large in one industry compared to its peers, and online advertising will continue to dwarf other areas of advertising in growth well into 2009 and beyond.
Rob, the usual proxy for how online advertising is going to do is Google. And Google's stock is holding up fairly well (above $300 today). Their growth will slow certainly - and slow enough that there were apparently no bonuses this year (except Android phones).
But like everything it depends on an exact segment, and online display ads will not fare as well (even though Google does those too now, but albeit not much).
I think you're correct, print, tv and newspaper are going to take the brunt. And with that, advertisers will shift more to online. How much is REALLY hard to say. I will say that our advertising with Techvibes has worked well - because we can track it.
Overall, I can see a decline (especially for the small to mid-sized content based sites).
However, I can also see an increase in ad sales for sites that offer tools that make marketing easier, cheaper and more effective. The best example I can think of in this sense would be the Facebook ad platform.
The advertiser is risking time and money on the premise that the ads will return results. With a smart online platform, you can alleviate their concerns by giving them concrete stats on ROI.
I think it’s safe to say that all advertising will take a hit, but online will be the least affected.
All the fears about the economy will make most people rethink their marketing strategy to save money, prepare for the worse, reduce budgets "just in case," and steer away from risky campaigns - online advertising will be the best for that.
Not only can you afford to be more creative and spend less on it, which will be appealing to those companies trying to save a buck, but you can also track it, which will be a huge draw to those staying away from risk.
