Online Advertising Consolidation

Jeff Jarvis notes that Google controls 40% of online advertising, and that their share of online advertising is growing faster than online advertising as a whole. In a world where online services are increasingly monetized by ad revenue – this concentrates incredible power in Google’s ad serving algorithms.

It’s not hard to understand why they are growing at such a clip – first the search market is tightly tied to the transactional ad spending – and that’s still growing rapidly as merchants discover the power of on-line ad to drive people to their site/store. Google is also one of the few companies that make buying ads or listing inventory easy – allowing both sides to scale in relation to each other. Finally contextual placement means assures the clicks that reinforce every party involved.

Some authors see the transactional ad market as a tiny sliver of the potential online ad market – noting that traditional media especially TV still collects the lion’s share of ad revenue and it is mostly brand (value / awareness) advertising. In fact it was only this summer that internet advertising surpassed radio – the media that came closest to transactional advertising for an age where in-store activity drove transactions. And radio in the smallest of the ad media – a third smaller than local TV and less than half the size of newspaper’s ad share.

ad-share-by-media-type.JPG

Magazines – another media form that offers advertisers content that can be relevant to their ads – is more than 2 times as large as internet advertising – while national TV is more than 4 times as large – and national + local TV is almost 6 times bigger. Taken together the entire internet has just 7.8% of all advertising spend – and Google ‘just’ 3.1% of the overall market.

ad share

 (Note both Tables from http://www.tns-mi.com/news/09112007.htm)

 Jarvis is right, “We need new networks that identify and create new marketplaces for new value — greater value than the coincidence of words on a page, which Google sells. “ This should be the domain of ad networks – but if my recent experience is an example they are not stepping up to the plate.

Ad Networks and traditional media have an opportunity to act as an interface between Agencies, who develop and place brand advertising for national customers, and small web or multi-platform publishers. This will be increasingly important as consumers shift their media attention from traditional media to web driven media. As Google learned the value is in the relationship between the advertiser and the content publisher – and that’s more difficult to automate for brand advertising because the content of the entire site becomes important.

The problem is that Ad Networks and traditional media have not automated enough of the qualification process for web publishers – so site traffic has to be substantial before they can afford to describe a sites market to advertisers or target ads specifically enough to that the revenue from them is better that is available from Google.

That has to change if Google’s online dominance is to be challanged.

Advertisements

One thought on “Online Advertising Consolidation

  1. already in a few countries internet ad spending has exceeded ad spending in print media… in the next ten years we’ll see the same situation for TV ads… you can quote me on that one…

    Aydin Mirzaee

Comments are closed.