Online Ad Revenue Hit All Time High
November 23, 2010 § Leave a comment
U.S. online adverting sales reached $6.4 billion in the 3Q of 2010, a record high since the earliest online promotion of Sears products by a company called Prodigy owned by IBM in the 1980s. To put the number into context, it represents a 17% increase from the same period in 2009. The report was conducted by Interactive Advertising Bureau (IAB) and PwC US and released on Nov 17.
“Marketers have embraced digital media because that’s where they can engage with their consumers,” said Randall Rothenberg, President & CEO, IAB, “This vibrant, innovative industry is creating jobs and contributing to the growth of the U.S. economy.”
“Advertisers are shifting more of their brand messaging online, accounting for this welcome surge in a difficult economy,” said David Silverman, a partner at PwC. “This trend reflects the accelerating shift in consumer behavior towards the internet and away from traditional media.”
Quarterly Revenue Growth, 1Q01 – 3Q10 (In millions)
For every one of these too-good-to-be-true reports as such, there are always skeptical voices.
tphilpot from New York posted a comment on adage.com, saying:” Very interesting – but didn’t traditional media ad revenue increase in the 3rd quarter, as well? Is this attributable to an “accelerating shift in consumer behavior towards the internet and away from traditional media” or a recovering economy?”
LudvikPlus from New York wrote:” Why in this world traditional still leads ad expenditure in US?”
I would say it is a trend that online advertising is growing at a faster pace than that of traditional media. However, it is somewhat meaningless to compare online with traditional ad at least for now. According to data compiled by eMarketer, total ad spend in the U.S. is $166.5 billion, with a growth rate of 2.3%. Online ad spend accounting for 15.1% for total ad sales in the U.S. is $25.1 billion, with a growth rate of 10.8%.
First and foremost, traditional media includes newspapers, magazines, television, radio etc., while online advertising only represents itself.
Second, it is true that there are more websites than the number of traditional media combined. However, the audience size of websites, on which advertisement relies, varies more greatly than the audience of newspapers and televisions. Plus the price of advertisement also varies, from a couple of dollars to a 30-second Super Bowl ad of $3.01 million. Even though the formula for revenue is quite simple, number*price=revenue, it is hard to estimate if online ad revenue should exceeds traditional ads.
Third, quality issues. I haven’t found any data on earnings per dollar paid for online advertising. No surprise, it is almost impossible to track each consumer with a particular ad, since most companies incorporate numerous forms of ads in their campaign. Generally speaking, I think, traditional ads still outperform online ads in terms of generating revenue for retailers. According to a comScore report on Nov, an average U.S. internet user was delivered more than 6,000 display ads during the three-month period. Imagine how many of those ads have any influence on your purchasing behavior or decision making? Probably very few. When people are bombarded with online ads, they turn off their radar and ignore every one of them. Now think of the ads you saw while reading a magazine? No matter how quickly you flip through, there has to be a sufficient amount of time for you to read the colorful page for it to make an impression on you.
At least, that’s my personal experience, when I read Vogue, ELLE or Marie Claire, the ads seem much less annoying that those usually poorly-made unthoughtful (no offense) ads online, especially the perfume magazine ads with fragrance emanating from the paper.