The Economist is bullish on online ad spend next year. I'm banking on it! They also highlight social network advertising as one of the potential bright spots.
Refreshing to see them not jump on the "clickthrough rates are low, ergo its failing" bandwagon. They may be right that social network advertising has "thus far proved
ineffective" only if you take "advertising" in the most literal sense:
sure, banner performance "sucks". But the "clever marketing managers"
(partnering with clever tech/media entrepreneurs) Mary Meeker lauds will recognize that
effective advertising on these sites is going to look and work
different than banners... just like search, the phoenix rising from the
last flameout, looks and works different than banners. The "arb" opp,
then, is to capitalize on market skepticism and exploit the perception
vs real opportunity gap. Sure there might be actual "buy low, sell
high" arb opps, but the early mover and bold investor arbitragers will
be the ones with enduring businesses at the end of this all:
The industry is also cautiously excited about two new forms of online advertising: [first is video.]
The other hope is for ads on social networks such as MySpace and Facebook. They are experimenting with a variety of advertising formats, though none has yet proved very successful. Their big weakness is that users go to social-networking sites to socialise, not to shop (as they might on search engines). Their biggest strength is that users spend so much time there. Two years ago 11% of time spent online was at Yahoo! and MSN, two web portals; now their share is down to 5%, and 5% of online time is spent at YouTube and Facebook.
Online traffic, in other words, is moving towards sites where advertising has so far proved ineffective and is therefore cheap. This, says Ms Meeker, presents an opportunity for innovation and arbitrage by clever marketing managers as they cut their conventional ad budgets. It may also provide a glimmer of hope for the advertising industry as it enters recession.
Not ye olde banners | The Economist (Nov 27, 2008)
