What 2010 holds
for online advertising
Marketers will be more focused on deeper engagement
By Diego Vasquez
Jan 6, 2010
Buoyed by steady investment in search and advertisers siphoning off money from print to invest in digital, online was virtually the only advertising category not to see major declines in 2009. Though the medium did sustain its first year-to-year advertising revenue loss in seven years, it began to bounce back in the second half, becoming one of just two media categories (the other being cable) to see growth during third quarter. That resurgence will continue in 2010, when spending will rise 5.5 percent, to $23.6 billion. It will be driven by search, which now accounts for about half of all web advertising, but also video, which will benefit from a new effort from Apple expected to launch this year. Still, there remain some problematic issues in internet advertising, chief among them how to monetize hot sites like Twitter, which saw its user base explode but has yet to come up with a viable business model. The worry, of course, is that the site will end up like AOL and MySpace, one-time web giants trying to rebuild after years of poor choices. Geoff Ramsey, chief executive officer at eMarketer, talks to Media Life about online video, paying for content and the Twitter question.
What was the biggest story of 2009 in online advertising?
Good question. That’s really hard because there are so many things going on. To pinpoint any one story is challenging.
I think, and it probably surprised me the most, Twitter is the one story that has got me scratching my head and wondering why.
And I know I’ll get blasted in the Twittersphere because I don’t get it, but it did take me by surprise. I kept waiting for it to die out, and it never did.
What will be the three biggest storylines in online advertising this year?
Definitely look for some more activity in video. The cat’s out of the bag in terms of online video starting to siphon off some dollars from traditional.
That’s not saying TV’s going away or anything, but there’s some real heavy activity coming in now with Hulu and YouTube, and Apple is getting into it now. If Steve Jobs does to TV a fraction of what he did to music with iTunes, life will be changed. And maybe not for the better for some.
Broadly speaking, this is the year when we’ll see some in-market experimentation with new business models for traditional media. Now that the audiences are shrinking so dramatically in newspapers, radio and magazines to some extent, and knowing that free ad-supported online revenue streams don’t make up for it, it’s really time to come up with some serious alternatives.
I have opined that, whether it's next year or eventually, and given the proliferation of content out there, that advertising will be paying less of the freight. Therefore, it’s going to have to be more consumer direct payment. It’s unfortunate that comes when consumers are so cash-strapped.
With the proliferation of content, with so many choices both free and some for-pay, plus the technological ability for consumers to tune out or click away to something else, it will seriously raise the bar for advertising creative, if you’re going to have and ad-supported model. The ads need to be more targeted, creative, compelling, useful—things that provide real utility or entertainment to the consumer.
The fixation on reach at all costs will give way to sacrificing some reach so I can get deeper engagement. I reach less people who are sprinkled all over the place, and my job is to stitch together these niche groups of people. Pulling together targeted people. Because they’ve been handpicked, the message will go deeper and have more impact. What that entails, though, is that we do a better job of capturing intentions.
If we can do the same thing where we look at where people are going online, we can figure out from that this person is interested in this and has purchased this kind of thing before. Then we will create ads that resonate more with people.
Why did online advertising hold up well, relatively speaking, during this recession compared to other media?
I could write a book on that. Everything took a hit this year. Television, newspapers, etc. It will abate somewhat in 2010, but it will never return to normal.
We’ve seen study after study that shows a direct intention of marketers to siphon money from traditional advertising and put it into digital.
To be brutally honest, part of the reason online held up so well is search, which is half of total online ad expenditures. It’s one of the most targeted ways of reaching folks. It provides bottom line. That’s a good chunk of it.
Also, display advertising didn’t go down nearly as much as people were predicting. We thought it would hold up flat, and it’s looking like it will go down 3 percent to 5 percent, or something like that. What tanked was classified.
But for online to hold up that well is pretty astounding.
Social is one aspect, and video is growing. And we’re starting to get better at targeting and using the technology to engage with customers in new and interactive ways.
What categories look strongest in 2010 (search, online video, etc.) that will lead the recovery?
We have to be careful when we look at percentage growth rates on small numbers. Search is a huge sum of money and it will grow, but not at the huge growth rate; it will slow down.
The biggest engine of growth will be video, but it’s working off a small base. It will be a slow ramp up because we have to reinvent business models.
And don’t underestimate display advertising, it’s a pretty big chunk of it. It will grow again this year, although not super exciting growth, partly because of better targeting.
Do you see Twitter monetizing its huge growth in users over the past year? If so, how? If not, why not?
I Twitter, and sometimes wonder why I do that. I think it’s a fascinating sociological phenomenon. But when I look at the stats and I see a 50 to 60 percent churn rate, the average user does just one or two tweets per lifetime.
On the other hand, no one has presented to me any kind of viable business model. Facebook’s tried a number of things and they’ve fallen flat on their face.
I’m not saying this to be skeptical or negative. I think it has its place, but I’m hesitant to say it will generate the sums of money some people are expecting it to.
What we might see is a next generation that not only connects people but also has a business model behind it.
Obviously the rise of Twitter was a big story last year. Are there any other services on the horizon that you think could have a similar impact on 2010?
You know, if I knew that I’d probably be off in the Caribbean right now. To predict the future is tough. Even though we do make projections, we do it based on what’s already happening.
What do you see as the business model of the future for MySpace, which has lost a lot of ad revenue and market share to Facebook?
I don’t know what to do with MySpace. They’ve got bad mojo right now. When you have massive defectors and the press beating up on you, it’s hard to resurrect yourself. Tim Armstrong is trying to that with AOL, and I wish him the very best.
In the world of social networks, the kind of quirky nature of these things is “I’m on MySpace one day, and then I find Facebook and I dump MySpace like a hot potato”—it’s like high school. Or like a new restaurant. If something new comes along and has that cool factor, then it has everything going for it, and it’s really hard to regain that. The mistake was they didn’t innovate fast enough like Facebook did.
What is the single-most important thing for media buyers and planners to know about online advertising in 2010?
The most important thing is to invest in the people and technologies and tools that will allow you to identify and stitch together audiences of intenders based on the bucket loads of data we can grab on people. To be able to stitch these all together and re-aggregate them into an audience that would be right for our target audience.
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