• by Ashkan Karbasfrooshan , Op-Ed Contributor, January 23, 2012

The great thing about writing so many articles is that when I meet people, I can shut up (well, sometimes anyway), ask questions and listen.  In the past few months, every time I asked someone how their fourth quarter was, I got the same response: “Good, but not as good as I expected.”

I would then follow up and ask if they meant “sequentially, relative to Q3 2011” or “year-over-year, relative to Q4 2010.”  That’s where I got a divergence in the answers, but to summarize, Q4 2011 was not as strong as many expected:

-      For many, Q4 2010 or Q3 2011 (not Q4 2011) was their best quarter;

-      For others, Q4 2011 did turn out to be their best quarter ever, but the growth rate fell mildly or dramatically sequentially and annually.

While I believe that Q4 2011 will be online advertising's best quarter ever, I believe it won't show the dramatic sequential or annual growth many had hoped.

Publishers and the Fourth Quarter are BFFs

Historically, the fourth quarter is always the strongest quarter for advertising.  Part of this stems from a big push in time for the end-of- year holidays.  As well, marketers seek to end their fiscal and/or calendar years on a strong note.  Last but not least, CMOs want to ensure that their marketing budgets are spent; otherwise, they’ll have a hard time lobbying their CEO and CFOs for an increase the ensuing year.

However, even going into the season, some publishers saw revenues begin to evaporate, and now that earnings are released, we’re seeing that no one was spared.  Google controls 45% of global advertising revenue and generates 100% of its revenues from advertising. It missed analyst expectations by $300 million while generating a still-impressive $8.13 billion for the fiscal fourth quarter.

But $300 million is a lot of money.  If Google missed by that much, it wasn’t alone.  How come?

Sure, there were some unique occurrences this year: by mid-year, the recession scared off many CMOs from opening up their checkbook and making a big year-end push.  But CEOs also probably asked their CMOs to cut back their spending altogether.

But I think in 2011 there were more systematic changes, which will continue in years to come.

Online is Losing its Novelty

In my ten-plus years working in publishing and advertising, nothing gets me as excited as fourth quarter “found” or “bonus” money.  You know, when you get a call or email from your favorite media buyer telling you he/she needs to place more money. 

But now that online advertising is edging close to its 20^th anniversary, the reality is that online is falling into many of the same patterns that we see in traditional buying.  Notice that advertising online no longer automatically growing sequentially, though it does annually, quarter-over-year. 

Planning is Changing

Similarly, media planners and buyers don’t want to be caught off guard in the tail end of the year having to scramble to buy media.  With planners spending more with fewer suppliers, even if they need to allocate more money, they know where to spend it.

Rise of Machines

This takes us, of course, to how marketers plan and spend their budgets.  With the advent of trading desks and ad exchanges, premium publishers are increasingly bypassed either because they prevent buyers from accessing their inventory, or offer it after their direct clients can access it.  Even if publishers end up running campaigns from those marketers, the margins are lower, so the net effect is that they pocket less actual revenues.

While I’ve cynically pointed out that bundling audiences in such a manner is akin to the mortgage debacle, I also fully understand why underpaid and overworked media planners take shortcuts in such a manner.

That Last Second Rush is Actually Ineffective

Ultimately, while all of those reasons are valid, I also think that -- despite my being totally biased, since I benefit from those last second buys -- most last-second “found money” spends are rather ineffective.

When all is said and done, online advertising will continue to grab market share at the expense of traditional media -- but expect it to further emulate traditional media, as well.