I often find myself speaking with financial analysts about the state of the industry and its current trends (as they like to view it: quarter to quarter). During a recent conversation, I realized since the beginning of the year, one could make a few notable observations about the industry. The remainder of 2005 looks interesting, too. So following are some observations on the first half of 2005, and a few things we see on the horizon.
Creative Formats Quiet Down
Not that long ago, there was a flurry of new companies and formats that allowed advertisers to creative immersive, engaging ad experiences. From Eyeblaster to EyeWonder, PointRoll to Viewpoint, United Virtualities to Klipmart, Motif to Ad4Ever, all were coming out with new ad formats. It appears that by and large, we’ve arrived at a place where we’re taking full advantage of the real estate publishers provide, and there isn’t much more that can be done with a 728X90 or 160X600 space. With the exception of Atlas DMT announcing Atlas Rich Media about a month ago (a product designed to compete with the DoubleClick Motif offering), the sector has definitely quieted down. We expect it to stay that way for the balance of the year.
Display Advertising Prices Edge Upward?
Media people are masters of disguising and burying individual item costs in an overall package to arrive at a palatable blended rate or CPM (define). It’s therefore very difficult to say with any degree of precision whether costs are rising in the space, or not. If hard-pressed I’d guess they are. This is probably due to the prevalence of more premium inventory, as well as precision targeting methods (all of which come at a price premium). Pricing is a natural result of supply and demand. Since we have such strong demand and a relatively static supply, it would stand to reason prices are inching up.
Behavioral Targeting Inches Towards Standardization
Those of you who have run behavioral targeting campaigns using technology from Revenue Science or Tacoda probably had a reasonably good experience. Whether the objective is brand- or direct response-oriented, behavioral targeting allows advertisers to reach their most valuable prospects, and allows publishers to monetize less-than-desirable inventory. It’s a win-win — unless you want to place a buy across multiple publishers and use the same behavioral targeting segments. Both Tacoda and Revenue Science have announced behaviorally targeted networks. But from the agency vantage point, we want to see additional segment standardization across the Top 50 publishers. We also want to see comScore and Nielsen report on these segments, and we want tools to allow us to control media delivery across the properties. Stay tuned on developments in this area over the balance of the year.
AOL Wakes Up?
One of the biggest things to watch during the second half of the year will be America Online’s new strategic positioning. Many of us have said for years that AOL.com is the most underutilized asset on the Web. It appears AOL finally got that message, loud and clear. After years of defending its stance on creating unique and compelling content (for AOL subscribers only), they appear to be making a big, bold move onto the wide-open Web. Arguing subscribers come to AOL for many reasons besides content (a safe environment with advanced parental controls, spam filters, virus protection, etc.) AOL will open all their content to the Internet sometime this summer.
This could have significant marketplace implications. With ample promotion, AOL.com could grow into a reach powerhouse. That will give MSN and Yahoo a run for their money. Additionally, it will add a host of new inventory to the marketplace. That should help modestly drive costs down across the big three portals, and beyond. Most notably, it increases the supply of the most sought after inventory for mass advertisers: homepage real estate and streaming video. The jury is still out on how AOL.com’s story plays out (AOL has historically had a knack for messing things up). From what I’ve seen, I’m pretty confident the move will be excellent both for AOL and the overall industry. We’ll see.
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