Commentary

Just an Online Minute... Good News

  • by December 15, 2000
A new report by Forrester Research spells good news in these pessimistic times. The research firm predicts that if Web companies can hang on for just two more years, profitability will arrive. And the oldest media revenue source - advertising - once again will step in as the savior.

There is no doubt that the current picture is bleak. But analysts say patience will bear fruit. The number of households coming online has grown steadily by about 50% a year - a figure that can't hold up. In fact, by 2005, the number of online households in the US will number about 80 million, only 20 million more than currently have access. That is exactly the kind of stability the ad market needs to create high-priced demand for online advertising, a market Forrester projects will reach $27 billion by 2005.

As advertisers continue flocking to the Web, they will be forced to compete for many of the same "super-target" online content pages - search-query returns on Yahoo and the shopping-bot results on the MySimon.com. But not all advertisers will be able to schedule ad campaigns on those pages, nor will they wish to pay the high price those ad slots will fetch. Instead, the trickling will begin.

Just below the "super- target" site grade lie "premium" site pages, well-contextualized pages of content designed to work with targeted ads. As these high-grade Web pages fill up with high-priced ads, advertisers will be forced to the last trickle-down stage, into the lowest Web receptacle, which the report labels "mainstream pages." Report authors say there are not that many new people coming online, and they're not generating that many new page views over the next few years. It's really the dollars that are starting to come into online ad spending that are driving the picture.

"Right now, the moment we're sitting in is the moment at which the supply of consumers and the demand of ads are uniquely far apart from each other," report authors say. "It has never been so bad in the past and it is never going to be so bad again. We've reached the bottom, and things are only going to get better from here."

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