Only $8 Billion?

Merrill Lynch analyst Henry Blodget delivered some stunning, depressing news earlier this week.

He said the online ad market in 2001 would total “only” $8 billion.

Blodget made this sound as terrifying as he possibly could. He said he was reducing his 2001 estimate by $1 billion and that this present quarter would be truly horrible. (Of course, the first quarter always is, when compared to the Christmas quarter.)

The estimates came out as Yahoo and DoubleClick prepared to report their fourth-quarter earnings. The numbers weren’t horrible, but Yahoo especially (which plays the expectations game like Intel’s Andy Grove did in his prime) was “guiding analysts downward” for the future. Yahoo was also pointing to gains in its software and wireless businesses. It’s not rattling tin cups over there.

Now take a look at the chart our Bill McCloskey pointed to Wednesday. At $8 billion we’re looking at nearly twice as much money as web advertising generated in 1999, which was supposedly the boom time. Heck, I’m old enough to remember 1996 when the total was $268 million.

And with all the dot-bombs going off everywhere, that $8 billion will spread far more thickly than it would have otherwise. My competitors went under? That’s good, there’s more for me.

The problem is that, for now, the industry’s not growing. This means the speculators are leaving. It means investors are expecting profits, not growth. (But you knew that already, didn’t you?)

Look again at where the money is coming from, according to the latest audited report from the Internet Advertising Bureau (IAB), which covers the third quarter of last year. Nearly one-third of the money is coming from consumer-related advertisers, nearly one-fifth is coming from computer firms, and one-seventh is coming from financial firms. These companies are not going away. Oh, and by the way, 92 percent of the deals were for cash.

Sure, you have to deliver customers to get those dollars. You have to prove what you’ve delivered. You have to be accountable. But we’ve been saying that for years. Those sites that can prove their audience now earn advertisers’ trust. According to the IAB’s report, 28 percent of ad spending consists of sponsorships.

I’m reminded of the first speech I heard in journalism school, given by the late George Heitz. One of the things he emphasized was that “if you want to make a good living, get a spouse with a good job.” He pointed to the back of the room and noted that Northwestern also had a business school, and those of us who measured ourselves solely by money should go there.

If you’re in Internet advertising, it’s a good time to replay such a speech in your head. If money alone is the only thing keeping you here, go find something better to do. We have an industry to build, with new formats, new measuring tools, and new kinds of deals to be made.

There’s $8 billion sitting out there for 2001, waiting to be spent. If that pot of gold isn’t enough to get your juices flowing, please leave now.

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