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Online Advertisers Should Look Beyond Content, Analyst Suggests

21 Mar, 2012 By: Jackie Jones

NEW YORK – Content has been usurped in importance by infrastructure, platforms and tools for the Internet advertising industry, according to the latest report by Pivotal Research Group.

The report, titled “Internet Advertising: Content Passes the Crown,” was authored by analyst Brian Wieser and looks at the industry’s long-term outlook and its dependence on a few select, large marketers for continued growth.

“On the Web, the argument (that) content is king is difficult, if not impossible, to make in the long run, in our opinion,” Wieser said. “What is important are infrastructure, platforms and tools controlled by Google, Facebook and others.”

Global online advertising is projected to generate $87 billion in revenue in 2012, and could jump to $130 billion in 2016, according to the analyst. “This implies that online advertising will capture more revenue than newspaper in 2012, and by 2016 should generate more than newspapers and magazines combined,” Wieser said.

Seven dominant Web advertisers – Google, Amazon, eBay, Priceline, Expedia, Groupon and IAC – spent nearly $7 billion in U.S. online advertising in 2011, driving a 20-percent growth in the online ad market, according to Pivotal Research Group. When you exclude those seven companies, all other marketers who advertised online increased their online expenditures by only 10 percent in 2011, a cause for concern, according to Dave Morgan of MediaPost.

“It’s great to have these Web companies growing their online ad spend so much, but you have to wonder what the long-term implications are for the market to depend so much on such a relatively small foundation of companies – all of whom are primarily advertising services endemic to the Web,” Morgan wrote. “You would think that as the industry grew and matured, its advertiser base would expand and diversify, but it hasn’t.”

The online ad industry’s dependence on such a small number of marketers is sure to hinder its growth in the future.

“The only companies really growing their online ad spend are endemic, response-focused marketers. That sounds like an industry that can and will be bigger than Yellow Pages and radio or newspapers. It doesn’t sound like one that will be bigger than TV,” Morgan added. “Web advertisers are still struggling to find ways to use the medium to tell stories, and to tell them in meaningful and effective ways. Web ads almost never make us laugh, wince or cry. That has made it difficult for brand and mass awareness advertisers to commit their money in a big and growing way.”

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