Branded display ads and search placements helped the online ad industry post its best year ever in 2006, according to numbers released Wednesday by the Internet Advertising Bureau and PricewaterhouseCoopers. Overall, revenue increased 35% last year to $16.9 billion--due in large part to record fourth-quarter revenue of $4.8 billion. Both search revenue and display revenue climbed 31% year-over-year, to $6.8 billion and $5.4 billion, respectively. Search accounted for 40% of last year's revenues, slightly lower than the 41% it commanded in 2005. Display advertising, classifieds and referrals accounted for 32%, 18% and 8% of last year's full revenues, respectively. "The ability for these marketers to achieve both performance-based and branding objectives with interactive advertising is the foundation for this exceptional growth," explained David Silverman, partner, Assurance, PricewaterhouseCoopers. Consumer-related advertisers accounted for the largest revenue category at 52%--up from 51% in 2005. Financial services, the second-largest category, accounted for 16%, followed by computing advertisers with a 10% share. Within the consumer category, the biggest sub-categories were retail, with a 47% share; automotive with 22%; and leisure with 13%. The industry remained highly concentrated among the top 10 sellers, which accounted for 69% of revenue last year. Still, this was less than the 72% that top sellers controlled in 2005. The IAB expects last year's growth to continue apace, according to Randall Rothenberg, president and CEO of the bureau. "We have every confidence that this growth trend will continue as marketers allocate more of their total marketing dollars to interactive and the industry delivers effective and innovative platforms for connecting with consumers," Rothenberg said Wednesday. Search, display, classifieds and lead-generation all will continue to grow at a healthy rate, with an increase in both performance-based and CPM, or impression-based pricing, the IAB said. In addition, consumer advertisers will continue to represent the largest category of Internet ad spending. ADVERTISING FORMATS2006 (Ttl =$16,879)2005 (Ttl = $12,542M)Type of Advertising$% share of market$% share of market Display Advertising 3,685 22% 2,508 20% Sponsorship 496 3% 627 5% Slotting Fees 0 0% 125 1% Rich Media (including Broadband Video) 1,192 7% 1,004 8% All Display5,37332%4,26434% Keyword Search 6,799 40% 5,142 41% Classifieds 3,059 18% 2,132 17% E-mail 338 2% 251 2% Lead Generation* 1,310 8% 753 6% TOTALS:16,879100%12,542100%INDUSTRY CONCENTRATIONFY 2006FY 2005Top 1069% ($11,647) 72% ($9,030) Top 2582% ($13,841) 86% ($10,786) Top 5092% ($15,529) 95% ($11,915) PRICING MODELSFY 2006FY 2005CPM or Impression48% ($8,102) 46% ($5,769) Performance Deals47% ($7,933) 41% ($5,142) Hybrid5% ($844) 13% ($1,630) Source: PricewaterhouseCoopers/Interactive Advertising Bureau Get the full report here.
Google was mum yesterday on which select publishers and advertisers are participating in its closed test launch of "AdSense for Video," the search giant's much-anticipated in-stream ad service that could transform the industry by bringing ad revenues to online videos across the Web spectrum. Google said the test would help participants "learn the easiest and most scalable way to deliver ads to online video content ... Publishers will be able to insert high-quality, relevant ads that enhance the video content while maintaining a positive user experience." As is currently the case with AdSense, Google said ad revenue will be split between publishers and Google, but the share was not revealed. The videos will play on publishers' Flash players, not via Google Video or Google's YouTube--both of which have been reported to be testing their own in-stream video ad technology. Publishers can select in which videos ads run, and where the ads appear within the videos. They can also track ad performance. The creatives, limited to no more than 30 seconds, can be made skippable for users. Writing in the "Inside AdSense" blog, Product Marketing Manager Christine Lee was careful to distinguish the new service from click-to-play video ads on Google's content network and from AdSense's video distribution and sponsorship service. The latter, which has been tested twice, would allow publishers to choose video channels consisting of short-form videos bundled with video ads. Publishers using AdSense for Video should also be helped by Google's upcoming Universal Search, announced last week, which will integrate video results into all searches.
Branded content has a future; branded destination sites, not so much. That's the word from analysts and agency types trying to decipher the potential demise of Anheuser-Busch's hugely ambitious entertainment network, Bud.TV. "Bud was right on with the idea of branded content," said James McQuivey, an online content analyst at Forrester Research. "Where they ran into trouble was with the idea that they had to be a destination site." Debate over Bud.TV's troubles, and its industry-wide implications, was sparked earlier this week when August Busch IV, Anheuser-Busch's chief executive, said Bud.TV would "probably fade" during a conference call with investors. The beer maker grabbed the attention of marketers and the media last year when it unveiled a $30 million plan to challenge Hollywood with a branded digital entertainment network. In an oversized write-up, The New York Times Magazine called it "the most ambitious and costly effort to date of a marketer creating Web content tailored to its own specifications." But, as the network languished following a splashy Super Bowl debut, Madison Ave. was left trying to figure out where Bud.TV went wrong. In March, the number of unique visitors to the site dropped 40% to 152,000 from February, according to comScore. Even worse, traffic to the site in April was too low to be measured. In the case of Bud.TV, Anheuser-Busch may be a victim of its own pride, according to Phil Leigh, an analyst with Inside Digital Media. "There are only a few media players who rise to the level of a destination site, and everybody else is in the long tail" said Leigh. "Anheuser didn't want to be part of the long tail, but now they may have to." Because of Bud.TV's age verification restrictions, its success or failure has little bearing on the future of branded content, according to Chad Stoller, executive director of emerging platforms for Organic. "It's not fair to compare Bud.TV to other efforts because of the age verification issue," Stoller said, adding: "I do think they would have benefited from a better distribution strategy." Meanwhile, Tony Ponturo, Anheuser-Busch's vice president for global media and sports marketing, has remained solid in his defense of Bud.TV, telling OnlineMediaDaily in March: "We're not judging ourselves now ... We saying, 'Let's judge ourselves in February '08 when the site has taken root.'" Ponturo was not available to discuss August Busch's comments to analysts this week regarding Bud.TV. A person close to the initiative, however, insisted that Bud.TV is not dead yet, and there are new plans to breathe life into the network.
Microsoft has most of the pieces it needs to fulfill its advertising ambitions with the $6 billion aQuantive acquisition, and remains "very committed" to its year-old adCenter platform, which now has 80,000 advertisers, a senior Microsoft ad executive told the Goldman Sachs Internet Conference yesterday. The Webcast remarks by Yusuf Mehdi, Microsoft's senior vice president and chief advertising strategist, seemed to downplay any idea that Microsoft is looking for immediate scale through an acquisition of Yahoo. At best, Mehdi said, Microsoft may fill in "some other small pieces, organically or otherwise," when directly questioned by Goldman Sachs Internet analyst Anthony Noto. "We think we have the largest audience to monetize," Mehdi said, when looking across the entire Microsoft suite of products--from Office to Xbox. "I don't think it's the end of inning one." With the aQuantive purchase, Mehdi said, Microsoft is poised to become a leader in what he called discretionary advertising--matching an ad buyer with an audience rather than specific pages. To beat Google and basic consumer inertia, you have to do something big, bold and different, Mehdi said, suggesting there is plenty of room for improving the effectiveness of the search experience. (Microsoft search share dropped to 9% in April, from 10.1% in March.) "When we ask who is the highest ROI search engine for you," Mehdi said, "clients say the return on dollars spent with [MSN] are the highest, but you need to get more volume." The statistic to examine, Mehdi said, is not how quickly it produces 500,000 links, but that it takes 11 minutes on average to get an answer to questions such as what are the 10 companies that pay more than $2 in dividend, or where is the nearest restaurant in the neighborhood with a reservation available tonight. "Just a 10% improvement answering people's questions and you change the game on search," Mehdi said. "This is the opportunity. We are 100% committed to next-generation search experiences. We're in catch-up mode, but we've closed the gap on relevancy. In blind taste tests we're indistinguishable from the competition." Referring to the summit Microsoft hosted for the top 1,000 advertisers earlier this month, Mehdi said many companies that are just now coming online are willing to pony up $500,000 to $1 million for an MSN homepage roadblock. A day-long Hotmail roadblock taking over all available display inventory, he says, has increased unaided awareness for advertisers by 10 to 20 points. The $20-$30 CPM is still increasing for display advertising on MSN's most popular destinations--the home page, MSN Video, Home and Auto. Once the aQuantive deal closes (expected sometime after July), MSN will accelerate the inventory it puts through aQuantive's DRIVEpm ad network, Mehdi said. "The ad market has converged," Mehdi said. "Anyone who thinks it's just online search is missing that. It's all just inventory."
E-centives, Inc., one of the original digital marketing companies, has re-branded itself as Invenda Corp., and set up three business units: "Collabrys," providing integrated digital relationship marketing solutions; "ConsumerREVIEW," its network of media properties focused on user-generated content; and "E-centives," focused on the company's original business of Internet coupons and other interactive promotions. "What's old is new," said Dadi Akhavan, president of the firm that he co-founded 11 years ago, commenting on the recent rash of industry consolidation. "From day one, our perspective was multiple areas and businesses within this broader entity of bringing buyers and sellers together." One factor that has changed since the early days, Akhavan said, is an increased need for "substance," with "left-brain marketing components [measurement, tracking, ROI, etc.] becoming as important, maybe more important" than creative elements. "A lot of companies are putting things together in silos, and marketers are looking for integrated solutions," he added. How the integrated solution comes together at Invenda is exemplified by recent work for client Colgate, which brought together in one campaign such elements as an e-mail newsletter, coupons, an instant-win sweepstakes, and user-generated content in the form of a Mother's Day story and photo contest. The name Invenda combines "Invent" with the Latin word "Vendo," meaning to sell recommend or advertise. The company said the new name better reflects its current business, which has evolved largely through four key acquisitions over the years: the e-commerce search business of Inktomi, ConsumerREVIEW, Collabrys, and Brightstreet's technology for home-printed Internet-coupons. As the name change became effective last week, Invenda implemented a one-for-ten reverse stock split, reducing the amount of common stock from approximately 62.6 million shares to over 6.2 million shares. For the first quarter of 2007, the company's revenue increased 6% to $1,467,000 over the same period a year earlier, with 69% coming from the Interactive Database Marketing division, now under the Collabrys banner. Net loss for the quarter was $1,202,000, down from $1,354,000 in 2006. Invenda was born as Imaginex in 1996, taking on the E-centives moniker in 1999.
The past 24 months have been some of the best in the history of online ad networks. All the leaders in the space have been growing rapidly, and that growth has culminated in some stellar M&A deals. But what will happen to the future of display advertising? That's what many are asking now that a new model has entered the online ad industry. Open ad exchanges automate the buying and selling of bulk online ad inventory. By allowing networks, agencies and marketers to bid on inventory, the exchanges promise to introduce efficiency and automation to the digital world of media sales. The acquisition of DoubleClick with their ad exchange and the acquisition of the Right Media exchange by Yahoo seem to validate that the industry is looking for this solution. However, the problem with exchanges isn't what they do, it's what they can't do. And that is add value. Ad exchanges simply out-arbitrage the arbitragers. Instead of a publisher selling remnant ad space to a network who sells it to a marketer, they list it on an exchange where it gets picked up by an agency or a network. In either case, the exchange is simply playing the role of an arbitrage-model ad network--turning cheaper inventory into more expensive inventory without fundamentally adding any value to the inventory itself. In essence, an open exchange becomes just an "automated intermediary." Automating legacy processes to make them cheaper and more efficient is nothing to be ashamed of. It's part of the maturation process of every industry. But in my eyes, it's not the future of online advertising. The future of online marketing lies in making graphical display ads and video perform as effectively for marketers as search marketing has. And the key to that is data. If you're looking for a marketplace that works--search is the best model to look at. Marketers are essentially bidding on "data"--in this case keyword data--to create an economic marketplace that ties them together with consumers. Every time you search, you're telling marketers exactly what you're interested in at that very moment. That's why search ads are so targeted and perform so well. What many people don't realize is that by merging behavioral and other data sets with real time analytics and sophisticated targeting, we can now achieve that same level of performance with display ads. For marketers, application of this data often improves bottom-line campaign results by 10x or more over contextual targeting and means they can enjoy search-like performance across a wide swath of the Web. For publishers, applying advanced data can triple the value of their display ad inventory. For the handful of "next-generation," targeted ad networks capable of adding this type of value to inventory, it means we hold the keys to a market that's potentially five times the size of the search market, measured by total available ad impressions. So to those who ask me whether the good times will last for ad networks, I respond that it depends which type of network you're talking about. The traditional arbitrage networks that simply pass along deals or the targeted networks that use data to add as much value to the graphical display ad as search has to the text ad. I welcome the success of open exchanges. The best ad networks have already evolved into a model that's higher up on the online marketing food chain. With a good shakeout, people will finally notice. So will the good times continue for ad networks? Absolutely--at least for those that have the power to elevate the value of inventory and not just automate a process.