Last year, Razorfish’s annual Digital Outlook Report included a big surprise: the Microsoft-owned agency had ramped up its site-specific placements in 2007 to the tune of 1,832 individual properties, representing more than double the number it had bought from directly in 2006. One reason for the trend, according to Razorfish, was portal price hikes during the year forced agency buyers to look elsewhere for bargains.
Now that portals’ ad prices have fallen to earth and many new network offerings are in the market, the boon for direct sellers appears to have ended as suddenly as it began. In 2008, Razorfish says it slashed its site-specific buying back to just 1,024 sites, a cut of almost 50 percent. Yet portals didn’t win back that money. On the contrary, as a percentage of Razorfish’s overall spend, portals shrank from 19 percent of spending in 2007 to 16 percent in 2008.
“Scale still matters, but the choices available that deliver depth and breadth outside of the portals continue to rise,” wrote the report’s authors.
As the year drew to a close, the recession became the dominant factor in client spending. The agency said budgets atrophied late in the third quarter, and grew only 7 percent from Q3 to Q4. In the previous year, the quarter-to-quarter increase going into the holidays had been 17 percent.
With the rising gloom, clients of Razorfish and other agencies became more cautious, committing their budgets only a month or a quarter out.
“There is less of a worry of being locked out of inventory,” said Sarah Baehr, Razorfish VP and national media lead. “It’s very much a buyer’s market.”
According to the report, effects of the recession have also included a growing reliance on search and other channels with demonstrable return on investment. Spending on search leaped from 31 percent of all budgets in 2007 to 36 percent last year. Even so, Razorfish said, “We do anticipate that as budgets tighten, search will also be impacted by the economy this year.”
Spending on vertical placements declined to 35 percent, from 39 percent in 2007. Some categories fared better than others. For instance spending on entertainment sites, including video and lifestyle properties, rose from 18 percent to 24 percent, while spending on health destinations shrank from 15 percent in 2006 to 10 percent in 2008.
In the ad network space, Razorfish said the trend toward consolidation has diminished somewhat. The concentration of its spending with the top five ad networks winnowed from 76 percent of ad network money in 2007 to 62 percent last year, as niche and vertical networks clawed at the big boys’ market share.
“In the U.S., unlike previous years, we have seen the dominance of general ad networks wane and the opportunity to buy similar inventory in premium branded environments rise,” according to the report.
Smaller and unproven ad networks face major obstacles however. As some clients cut spending, the agency is reducing the number of ad networks it works with on those budgets. “For a direct response advertiser, we’re going to look at the top performers and maximize those opportunities first,” said Baehr.
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