Calling Microsoft's $240 million investment in Facebook "insane," and asserting that that there is not enough advertising budgets to support the rapid expansion of online advertising services, Publicis Chairman-CEO Maurice Levy warned that the industry was approaching the kind of hyper inflated economics that led to the so-called dot-com crash in 2000-01. In an address at this weekend's Monaco Media Forum Levy cautioned that the rapid run-up in the valuation of ad-supported online services may turn out to be fool's gold.
"Everyone is seeing advertising as the manna. Far too many people are building plans based on advertising and they may well be disappointed because there is not enough money for everyone," Levy asserted, according to a report in this morning's edition of the Financial Times. "It's exactly the same situation as we saw at the end of the 1990s, when everyone thought that because he had a website he'd get the valuation. Now everyone building a Web 2.0 operation believes he will receive the advertising."
Levy is a co-chair of the 2007 forum, which marks the second year of the international advertising summit organized by Prince Albert II of Monaco.
Levy was especially critical of the social networking craze and of the valuation generated by Microsoft's acquisition of 1% of Facebook, which he termed "unbalanced" relative to the potential advertising value of the social media marketplace.
He said the "bloom" was off the "Myspace rose," and that the exuberance driving investments in online social networks has yet to be proven by practical advertising models.
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