• by Karl Siebrecht , May 13, 2010

A few weeks ago, David Koretz wrote a great article on the challenges of online display advertising, highlighting that making it easier and faster to buy is good for the industry. 

This topic is near and dear to our team at AdReady. Since I joined, I've regularly been asked what I think the market potential is of solving these challenges in the display ecosystem.  I thought I'd share some of my thoughts on this question here.

First, let me set the scene and offer perspective with some market data. About $7 billion is spent annually in the display market here in the U.S., and research shows that about 40,000 to 50,000 advertisers participate in display advertising. Furthermore, 80% to 90% of the total $7 billion spent is by the top 500-1,000 of those 50,000.  At the same time however, there are more than 1 million advertisers buying search ads. Why is this? Why are people lining up to use search and overlooking display?

When I ask this question, the response I usually get is, "display doesn't work," quickly followed by "it doesn't work as well as search."

Throughout my career, I've had the privilege of working with some of the smartest and most experienced digital marketers in the world.  And, not coincidentally, most of these people work in companies within those top 500-1,000 spenders in display.

So when I hear people proclaim that "display doesn't work," I have to wonder -- if that is true, then why are many of the largest and most sophisticated digital marketers in the world not just buying display, but often spending more on display advertising than search advertising?  Are these folks being hoodwinked out of billions each year?

Of course not! The real issue is that display can work very well, but the costs required to manage it effectively -- particularly fixed costs that exist on top of working media budgets -- have historically been very high.  Managing display advertising well has historically required significant creative resources (has anyone at an agency, publisher or ad network every audibly winced when a client has said "here's my [one!] ad, now go and get me some online sales!"), teams of operations and analytical people, both creative and media oriented enterprise software solutions and more.

For advertisers with working media budgets in the millions per year, these fixed costs can be easily supported. But, for advertisers working with smaller budgets even in the tens of thousands per month range, effective display advertising has, in the past, been out of reach. Those smaller advertisers that have managed to try display, and many large advertisers who have tried to manage their display budgets in smaller, micro-targeted campaigns, have usually had to sacrifice sophistication, and thus have also most likely had to sacrifice results.  So for them, of course display hasn't worked. 

As technologies continue to package the sophistication that has historically been available in "enterprise" level software solutions into lower-overhead, yet highly advanced and powerful technology platforms, the demand side of the market will open up.  No longer will the size of a campaign -- whether launched by a smaller advertiser or by a large advertiser with many smaller, micro-targeted campaigns -- be a limiting factor in the viability of display advertising.

So how does this translate into the market potential for display advertising?  My colleague Aaron Finn has gone on record stating that display will be larger than search within the next five years.  I think he's right.

What do you think?