New IAB Ads Good For Industry, Says Merrill's Blodget

Analysts are reacting favorably to recent developments in Internet advertising, with Merrill Lynch’s famed Henry Blodget describing the Internet Advertising Bureau’s new ad standards as the start of a way out of the online ad slowdown.

In new a report this week, Blodget said that he views the IAB’s new standards — which it unveiled Monday, and which support larger and more obtrusive sizes than banner ads — as “another indication that the industry is beginning to innovate its way out of the current slump, with the aim of improving the effectiveness and ROI of online advertising.”

That’s been the problem for a while, Blodget said, with demand-driven pricing often making the cost of running an online ad campaign too high for a compelling return on investment.

Additionally, Blodget said the new IAB standards indicate that the industry is willing to try new ways to convince traditional marketers to include online media in their advertising spend — a fact that is supported by online marketing technology firms and publishers working with ad agencies, and hiring salespeople with traditional media buyer contacts.

Blodget praised the new ads’ larger sizes — which are similar to the larger-than-banner ads running on CNET, iWon.com, and internet.com, among others — as giving advertisers more flexibility and messaging space, as well as allowing publishers to charge higher CPMs.

While he did concede that current demand for online advertising remains weak, Blodget said he remains “optimistic” about the industry’s long-term prospects — even predicting a gradual recovery beginning this year.

But he added that things will only get better as current limiting factors begin to wane. According to Blodget, one reason for the continued lag in online ad revenues aside from the loss of dot-com clients, is an additional a loss of urgency among traditional advertisers, who no longer worry that they are going to be beaten by a swifter online competitor.

The situation is worsened by what Blodget said is “a lack of innovation” in online ad products and services — a result, he said, of the industry having had it too easy for too long — as well as the proliferation of irrational competition, and general economic weakness.

All of which, Blodget added, are temporary — and are beginning to change, as per the new IAB standards.

By the start of 2002, he anticipates most of these factors being a thing of the past, with several years ahead of at least 20 percent to 30 percent market growth, and with the survivors from the 2000-2001 shakeout in a strong position.