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Web spending
flocks to the larger sites The haves and have-nots
By Dirk Smillie
Half of the top ten sites are portals, including Yahoo!, Excite and Infoseek.
The dramatic divide in Internet advertising raises two questions: With hundreds of new sites launching by the day, why is web advertising becoming more concentrated, not less?
And does the increasing ad bifurcation mean that the ad-supported model for web sites will work for only a privileged few?
The megasites on eMarketer's top 10 list unquestionably deliver advertisers the Internet's only mass audiences. Given the choice to invest ad dollars at smaller sites for an uncertain payoff, it's no surprise that advertisers refuse to take the risk, says Kevin Wandryk, vice president of marketing and business development for AdKnowledge, which manages Internet ad campaigns. "Nobody's going
to get fired for placing an ad with Amazon.com or Yahoo!," he says.
That puts smaller sites with low traffic in an undeniable Catch-22. Often they don't have the resources to build sophisticated ad delivery platforms, and they aren't likely to raise the money to do so until they have a larger audience.
And unlike portals and online services such as AOL and the Microsoft Network, most small and medium-size sites have yet to offer e-commerce opportunities. For Tower Online, Tower Records' interactive division, that's a problem. The music retailer's online business model is focused on the idea that
e-commerce and advertising work hand in glove.
Most of Tower Online's ad budget is spent on portals and mass audience sites, largely because, "they're among the few areas on the internet that create a safe buying environment," says Jon Feidner, general manager of Tower Online.
"For a company like us, with slim margins and a relatively small budget, it's key that our advertising leads to immediate transactions." Few small and medium-sized sites offer such an opportunity, he says.
Tony Jaros, an analyst at Simba Information Services, says both advertisers and sites themselves have contributed to the web's top-heavy ad concentration. "There are the advertisers who are overly cautious and not very creative in choosing where to put their ads. And then there are the actual hosting sites, who don't exploit the opportunities interactive advertising has to offer and therefore don't attract advertiser interest."
Yet the growing gap between the haves and have-nots doesn't seem to bother Jaros. He points out that the same kind of ad concentration exists in traditional media. The eMarketer study makes a similar comparison, noting that the top six television networks draw 84 percent of the industry's ad revenues.
The fact that the top sites are drawing three-quarters of all web ad dollars, says Jaros, doesn't preclude other sites from making money "as long as the advertising pie expands."
And although the eMarketer study predicts the gap will grow by another 2 percent by the end of next year, to 74 percent, its long-term assessment is more optimistic. "As the web advertising market grows and matures," notes the study, "the concentration of ad dollars will begin to flatten out."
Top Ten Sites By Ad Revenue (in millions)
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