Evolving business models: A Web Shift in the Way Advertisers Seek Clicks
In the United States, $21.1 billion was spent on online advertising last year, up from $16.9 billion in 2006, according to eMarketer. Search advertising — Google’s stronghold — is the majority of that spending, according to Jeffrey Lindsay, an analyst at Sanford Bernstein.
According to a report by Imran Khan, an Internet analyst at JPMorgan Chase, ad networks “are growing much faster than the general graphical advertising industry.” He estimated that the top 20 ad networks had earned $2 billion in 2007, or 14 percent of the display market.
The reasons ad networks are thriving are price and improved technology. Ad networks charge much lower cost per thousand ads served (known as CPMs), as low as $4 on an ad network with some targeting, compared with $40 and up for some ads on premium sites like MSN or Yahoo.
“While the home pages are still very effective media buys, the price tags on them have become a little outrageous for many advertisers. For all the growth that has gone on from a site standpoint, there are other ways to amass that type of audience fairly quickly that are more efficient,” said Margaret Clerkin, the chief executive of Mindshare Interaction, a media-buying firm.