Random Musings on 10 Years of Online Advertising

Last week, DoubleClick released a study, “The Decade in Online Advertising, 1994-2004.” This “milestone” paper and other recent online advertising news, such as record profits for Google and strong earnings by Yahoo, got me thinking as I sat down to compose this week’s column.

It might be hard for some to believe online advertising has lasted even a decade when a mere two years ago, it could have been written off as dead. Given we’re an industry addicted to our own hype, it’s only appropriate we now trumpet our resurgence, which can serve to better whet the palettes of potential advertisers. Where are we really?

Are Ad Resources Any Better?

Ironically, DoubleClick, one of the original ad networks, is no longer an ad space broker. Other original ad networks imploded or sold out when the bubble burst. Those that seemed to survive most robustly during the lean times were performance-based networks such as Advertising.com and Tribal Fusion. Newer networks such as BURST! Media and Adtegrity cropped up, and the survivors have better technology for ad serving, tracking, and optimizing a campaign.

Are things really better from the buying side? There’s still no single reliable resource for online media planners as there is for traditional planners, such as SRDS and The Advertising Red Books. Building a custom-tailored ad campaign typically remains a highly manual, hunt-and-peck process.

Is Search Advertising a House of Cards?

Both Google and Yahoo released earnings last week. The two Internet superpowers are in a neck-and-neck heat. Google posted quarterly earnings of $1.256 billion. Yahoo wasn’t far behind with $1.17 billion. Smelling ripe opportunity and armed with case studies, analyst predictions, and plenty of press, both companies achieved their growth through aggressive pursuit of big-brand advertisers. Corporate CEOs, many of whom were woken from their slumber by a CBS “60 Minutes” segment on Google, climbed onto the bandwagon.

Is there enough search ad inventory to accommodate this influx of new advertisers and their increased demands? Google cleverly grew its inventory through its AdSense program for publishers. AdSense sites accounted for no less than 47 percent of Google’s total revenue this past quarter! Yahoo will likely soon launch a competitive program. Can it all last?

Google has yet to make it easy for advertisers to truly control ads distributed to content sites. If you ask me, the company likes it this way. The tactic helps grow and protect ad revenues. If Google made it easier for advertisers to control the price of the content side of their ad campaigns as Yahoo does, both Google and its AdSense publishers would lose out. With nearly half its earnings at stake, why would Google change the current model? Perhaps it will be forced to.

Since Yahoo makes it easier for advertisers to differentiate costs for search versus content, it probably will earn less from its new content program than Google did when it started. If Yahoo offers a competitive program for publishers, giving them a greater percentage of click revenue, would it chip away at Google’s dominance and revenue? Or will both players chip away at other players, those brokering banner and graphic space? One could argue it would depend on the nature of a site’s advertisers. Branders want big spaces to communicate big messages. But with users’ attention spans and tolerance for online advertising ever waning, it will be the most guaranteed and reliable advertising income that wins prime real estate on ad-supported sites.

Top this off with the fact there are still grumblings about discernable differences between paid and organic search listings (Consumer Reports‘ Consumer WebWatch will host a free conference in June called “Trust or Consequence: How Failure to Disclose Ad Relationships Threatens to Burst the Search Bubble“). A few nasty trademark lawsuits are still pending. It makes you wonder where search advertising will be 10 years hence. I remain a proponent of content as an online advertising vehicle. In fact, I’d like to see more of it. Stay tuned for a future column on the topic.