Online Ad Deflation
Lately, I have been reading tons of data about everything from ad revenue plummeting to the health care verticals fast exit from the search business. All the data we have provides us with supposedly crucial insights into the current state of situations within our economy or otherwise. But lately, I have wondered if we have so much data that it is starting to contradict itself. For instance, what does it mean when Comscore says Google has 77% marketshare? Is that even true? What does it mean? Does it mean that only 3 out of 4 searchers use Google?
Then I read this article in the Wall Street Journal that left out a crucial point about the data it cites. In it he states, “Display-related advertising–which includes display ads, rich media, digital video and sponsorship–totaled nearly $3.8 billion in the first six months of 2009, a 1.1% decline from the same period in 2008, the IAB said.” While this may be a decline from year over year spend, it neglects too mention that CPM prices have plummeted in the past year while volume has increased. With these increased volumes has come a seemingly endless supply of ad space across millions of niche sites that can leave a media planner stumped.
This significant uptick in both quantity and inventory, while prices decline, is leading to a hyper deflation of online ad valuations and an overall obscured view of the landscape. So when the Wall Street Journal posts that ad revenue dropped year-over-year it’s not exactly telling you the whole story. In fact, it’s only one part of a much more complicated story.
I would be curious to see the difference in prices today, as opposed to three years ago. I would suspect it costs more than 50% less than three years ago. This, along with rising inventories, is a perfect storm for destruction and ultimately redefining the entire market. But one can only hope…
