Is There an Internet Advertising Bubble?
It is easy to look at Google's stock price and think that it is overpriced, but marketing drives all markets, and there is a huge divide between how people consume media and marketing spend:
There is a growing divergence between how consumers spend their time and how advertisers allocate their marketing budgets. Last year, U.S. consumers spent nearly a third of their total media-consumption time engaged with online or interactive media, a dramatic increase from just two or three years ago. At the same time, Fortune 500 companies allocated only 6 percent of their marketing budgets to online media in 2006, up from 5 percent in 2005.
The web offers more precise targeting, a more interactive and engaging experience, bias toward wealthier consumers, and quicker feedback loops. That all trims waste.
As sales funnels get more efficient, and big advertisers move online, the ad markets will move past direct ROI measurements toward total lifetime value measurements and brand based metrics. If the web has 1/3 of consumer media consumption time before video was hot what percentage will it enjoy with the growth of video?
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With the acquisitions of online AD giants such as DoubleClick, Right Media and aQuantive it seems as if the Big 4 are preparing for the Online Advertising Platform that will one day become the main stream advertising media.
Given the example of a car purchase, where a consumer spends around an average 5 hours in 2 weeks before purchasing a car, just to get to know what problems they might face in the process and after demonstrates the every changing face of how the web will influence consumer markets and thought processes at the consumer end.
And i don't think that we are heading towards a advertising dead end, the only road ahead is more online activity and more online advertising.
I don't think it has to be a matter of a bubble bursting. I'm slowly starting to see signs that the bigger companies and traditional providers of entertainment media where advertising can be inserted, are seeing where the eyes are going, and their dollars are following.
And this is a bit different than other times of divergence in the past, because this time, you have a situation where there is a new level of transparency on the consumer level. As Steve Jackson predicted in 2005, the Social Pendulum is swinging - http://www.isedb.com/db/articles/1277/ - and because of that, the traditional media will be forced to understand what consumers are viewing and what they want to see.
They can't just ignore the problem, throw money at it, or rely on hype. If people want lolcats, then that's what they'll have to monetize. They'll have to follow the eyes to follow the money.
Great article by the way. I've never stopped reading your site and it just keeps getting better.
got to say, I'm a bit confused, now why you see an internet advertising bubble. If 33% of media activity is online but only 6% of marketing budget is used for online, it seems as if there was still plenty potential?
I assume you're looking farther into the future assuming at some point marketers will catch on and totally exaggerate their investments in advertising on the web..?
I think the real value of those percentages weigh heavier than thinner traditional advertising, and that may be the conception here. But I agree that there's still plenty of potential for years to come. It's still in the early stages.
I do not believe there is any bubble. Often times we forget there is a very large portion of the world population that doesn't even have access to the web. As those individuals get online, there is a whole new area to advertise to.
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