Tuesday, October 21, 2008

Online advertising: No immunity?

Price Waterhouse Coopers released it's 2008 first quarter online advertising report (here) for the IAB a couple of weeks ago.  It contains some interesting data on the state of the online advertising business:

1. Online advertising continues to grow in double digits (newsflash, I know)
2. Performance-based pricing models (i.e., clicks vs. impressions) now represent a majority of revenues (52%)
3. Display advertising, rich media and other traditional ad formats moved online are flat or on the decline...search remains the growth story.

chart via PWC 

So what?

As we've harped on previously regarding banner blindness, CPM deflation and more, the notion of passive, intrusive ad models online makes little sense in a lean-in, user controlled experience. The data from the report would indicate that search, which melds the user's defintion of relevance with pay for performance pricing, is looking like the most sustainable model of online advertising. Relevance remains a challenge for search marketers though lesser than CPM/Intrusive models.

The economy affects everyone of course. The economic downturn can be expected to exert even more pressure on CPM pricing. If and when search revenue tracks flat or turns down, expect display and rich media to have paved the way by many months.

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