The Bankwatch

Tracking the consumer evolution of financial services

Internet advertising – gaps in the advertising model

There is much talk about the growth of internet advertising, and the industry changing model of advertising that will support all other business.  Even Schmidt from Google spoke of free cell phones supported by advertising the other day.

So I thought I would dig deeper, and use the iab 2nd quarter report, that is validated by Price Waterhouse, so has validity.

First the introduction paragraph will make Tara spit (if she wasn’t a lady). 

“Interactive delivers an arsenal of options for advertisers no matter their marketing and business objectives. From search, broadband, lead  generation, behavioral targeting, consumer generated content and new emerging platforms like mobile and iPTV, Interactive continues to solidify its position as a mainstream medium. This latest report is a clear indication that Interactive is of increased importance to marketers today to engage their consumers and drive sales.”

Behavioral targeting, consumer generated, blah blah …  bad introduction,  by mixing tools, methods and devices, and nothing about peoples adoption.  Very traditional marketing spin.  Anyhow, we won’t let that deter us, so back to the analysis.

US Advertising revenue grows rapidly

Advertising revenue = money spent by companies on advertising.  So merchant A pays Google for adsense for example .. this is the revenue measured here.

 

We are experiencing a relative boom at the moment, with 36% growth 2nd Qtr over previous 2nd Qtr.  This is the largest since 2004, and that was growing off a much smaller base following 9/11.

This compares to $ 12 Bn in TV revenue in the top 100 markets during the similar period, so its starting to be big enough it must be diverting advertising spend.

When we look at the first half results and relate the the second half IAB can predict the full year and provide a comparison to earlier years.  2006 is a banner year for internet advertising.

However it is worth remembering this growth is from a standing start of zero in 1997.

In the space of 9 years, US Internet ad revenue has mushroomed to an estimated $ 18 bn in 2006.

Share of revenue

But lets look deeper at the statistics.  The first and obvious conclusion is the concentration of revenue in a few firms.  71% of the revenue is concentrated in the top 10 firms.  While the data is not available, I would guess the 80/ 20 rule continues to apply within that top 10 firm.

Building on that point, is the distribution of ad revenue across formats.

Search and oddly, classifieds account for 2/3 of the revenue.

Finally of relevance to Banks, the distribution of advertisers by category.

Conclusion

The growth rates through till now started off with banner ads, now evolving into search, and adsense type ads.  At the same time consumers are finding ways to avoid advertising, so it remains to be seen how the growth rates will move ahead.

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Written by Colin Henderson

November 15, 2006 at 14:10

Posted in Marketing

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