Thursday, November 20, 2008

OnlineSpin: Whither The Banner?

Last week Cory Treffiletti's "My Five (Early) Predictions for 2009" garnered a number of responses.

Among them, Craig McDaniel wrote, "There should be is a sixth prediction: Work with the publishers.

I have a very large number of members at Sweepstakes Today.

However I rarely receive the quality sweepstakes and contest text links and banners I ask for from the networks.

Now the sponsors are coming to me directly because the networks turned me down.

Do the quality ads exist? Yes but the networks have set up such a tight set of rules where an ad can be placed... that you are about to shoot yourself in the foot.

The network for years now have acted in a way that says, we are going to do what we feel is right. For sure, this definition of right is about to change."

Thursday, November 20, 2008
Whither The Banner?
By Dave Morgan

I'm very fond of the online ad banner, having worked with it for its entire 13-year life. It's been great to watch it grow -- and to play a part in its growth -- as billions and billions of dollars a year were spent on it. By 1998, the banner ad had become our industry's mainstay, and until search finally emerged as a significant force five or six years ago, the banner was certainly the primary driver of online advertising. Now, as I consider the future, I think that the banner's role, and its relative importance in the industry, is due for some changes.

The current economic crisis is causing all of us to try to imagine what the next couple of years look like. There seems to be no question that the U.S. Gross Domestic Product will be down for next year, and maybe only flat in the following year. This will bring all of advertising down in a pretty substantial way, maybe 8% to 10% down next year -- and possibly (but hopefully not) the same amount the next year. This will certainly pull down growth for the online ad industry. Most likely, our industry will be flat or show a bit of growth -- maybe low single digits -- in each of those years, but it certainly won't be uniformly distributed across online media types. Who will win and who will lose in the fight for online market share in the next two years? Here are my thoughts:

  • Search will win. Google is the world's greatest yellow pages and it will continue to grow. Google has lots more small and medium-sized businesses to sell to, lots more national markets outside of the U.S. where it doesn't have significant penetration, and lots to do yet to optimize the basic user search experience. In other words, it still has a lot of headroom to operate in. This crisis will certainly slow down the meteoric growth significantly, but given its ability to deliver ROI-based marketing, Google and search generally will still grow at a healthy pace over the next two years, probably in the 10% to 15% range each year.

  • Web video ads will win. More and more users around the world are watching video from the Internet on their personal computers. The usage is accelerating, and there is nothing about the economic crisis that would make one think that this phenomenon will slow down. I certainly don't. Video ads on the Web are effective. Whether they are more or less effective than TV doesn't matter; the bottom line is that they work and advertisers like them. We will see more of them. While the category is still quite small, and no one has yet created a scalable model to monetize user-generated Web video content, I still think that this sector will grow 20% to 25% each of the next two years, just based on audience growth alone.

  • Rich media and integrated sponsorships will do all right. While rich media and integrated sponsorships will feel the headwinds of the economy like other advertising, I do believe that advertisers and agencies will put more of their spend behind more impactful units, and ones that are proven to work, which both of these have been. For those reasons, I think that we will see rich media and integrated sponsorships collectively grow in the 5%+ area each year over the next two years.

  • Banners will lose. In a flat industry with a couple of winners, someone has to lose. It will be the banner. It will continue to be the workhorse for performance marketers and will support many brand campaigns, but I think the pricing for banners and the overall ad spend allocated to banners over the next two years will drop considerably, probably 15% to 20% for quality content sites and 30% to 40% for undifferentiated sites and those taking pure performance programs each year for the next two years. It won't be pretty.

    Whither the banner? It's not going away any time soon, but it's going to lose a lot of ground over the next two years. It's just not as good at driving pure ROI as search, or at driving pure advertising impact as video or sponsorships or other rich media. What do you think?

    Dave Morgan, founder of TACODA and Real Media, is Chairman of -- and a partner in -- The Tennis Company, which owns, and TENNIS and SMASH Magazines.

    Online Spin for Thursday, November 20, 2008:

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