Opinion: Mills On ... Online Ratecards

Some years ago in the BF period (before Freeserve), I was chatting to someone who could only be described as a new-media cynic about the potential for online advertising. Alien 3 was just out, which explains why he dismissed my enthusiasm with a glib quote - ’in space no-one can hear you scream’.

Some years ago in the BF period (before Freeserve), I was chatting

to someone who could only be described as a new-media cynic about the

potential for online advertising. Alien 3 was just out, which explains

why he dismissed my enthusiasm with a glib quote - ’in space no-one can

hear you scream’.



I thought it was quite an effective riposte since at the time online

ratecards were a joke and no-one was making any serious money from

selling online eyeballs - not that that stopped some advertisers from

producing banners so garish that they screamed at you anyway, albeit

silently.



The latest report from the Internet Advertising Bureau might be enough

to make my friend eat his words. This showed that web advertising in the

US in the third quarter of last year totalled dollars 1.2 billion - 148

per cent higher than the same quarter in 1998 and 30 per cent higher

than the second quarter’s figure. Year-on-year revenue is showing growth

of 125 per cent, leading one US commentator to describe it as a

’blow-out’ performance.



Given the likely level of spend in the fourth quarter during the run-up

to what was the first e-Christmas, all this talk of blow-outs seems a

bit of an understatement to me. And while dollars 1 billion or so a

quarter might not sound that much when you compare it with the total US

display market, it’s actually about 2 per cent - not bad for a medium

that is less than five years old. Given that the IAB only reports real

money transactions, and excludes barter ad deals, the rise is even more

impressive. So, you might think, those who predict the death of

advertising in old media might just be right.



But all those old-media folk crossing over to join the gold rush

shouldn’t quit their jobs just yet. While the numbers sound great, the

IAB report contains a fairly nasty sting in the tail. It is this: just

50 sites are responsible for 87 per cent of that revenue - which means

that, considering the thousands of sites seeking advertising, the jam is

spread pretty unevenly.



Although it is true that the web contains virtually no barriers to

entry, as a sector it seems just as prone to the trend to consolidate as

old media. We can, therefore, reasonably expect that the big sites will

get bigger. This means the smaller operators will have to scrabble

harder for revenue. In fact the process may have already begun. The

average cost per thousand impressions has fallen in the past year,

according to the IAB, from about dollars 38 to dollars 34 (and that’s

just ratecard, so heaven knows what the real cost is). As more sites

pile in, rates could fall even faster.



None of this would matter were it not for the fact that in the new-media

world, content is increasingly free (viz the painful lesson Encarta

taught Encyclopaedia Britannica) and it is the advertising revenue that

is supposed to underpin the revenue models of many sites. Without that

advertising, they don’t have viable businesses, let alone the ability to

spend millions on TV and posters to attract the eyeballs that attract

the advertisers they need. Perhaps my Luddite friend was right.





dominic.mills@haynet.com.



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