"The Internet-ad business is a little like a Mini Cooper. There is a limit to the number of people who can squeeze inside... Yet newspapers, magazines and TV outlets are each vying with Web-only concerns for a piece of the action... Oversupply of inventory could be particularly brutal for pricing."
Peers cites a statistics showing that from 2006 to 2008, ad spending on traditional media "dropped 4.8%, or $6.7 billion, to 1.32.2 billion," while ad spending on the internet rose by $6.6 billion, nearly the same amount. Suffering the greatest erosion in ad revenue: traditional media like newspapers. David Carr writes in the New York Times that the paper lost $74.5 million in the first quarter of 2009 in advertising revenue - and this includes an 8% decline in internet ad revenue.
As a journalist, I am well aware that my industry is in the midst of a full-scale panic right now about this loss of revenue, and how migrating to an internet-based ad revenue model will irrevocably alter the business model of journalism and how newsrooms fund their work. The oft-repeated phrase is that moving traditional media online is the equivalent of trading "analog dollars for digital pennies." Newspapers are attempting different advertising models that mostly involve different points of insertions of advertising in their content - between a link and an article, for example, as Forbes and Salon.com do.
The New York Times recently introduced a prominent two-banner display on its homepage, just below the masthead and above any of its breaking news stories.
For the most part, this main banner ad is thankfully not of the flashing, tacky variety - but the presence of a single Apple logo dominating a quarter of the horizontal space and propping up both sides of the lead story is, at least to me, a little disconcerting. I'm under no illusions that the news isn't a business, but the prominence of advertising surrounding the content, like a moat -- look, it troubles me. And yet, as Carr writes, even though this new huge homepage banner is enormous, the Apple banner ad doesn't even come close to replacing the Tiffany ad that traditionally runs in page three of the physical newspaper every day (It's had that spot for a hundred years!). The banner ad brings in far less money, and, as Carr writes,
"Until our digital model finds a way to create a similar kind of exalted placement, it will be tough to charge the kind of prices for advertising that reflect the cost of producing quality content."
It is also all the more apparent now that newspapers - accustomed to being the role of displaying the marketing output of their advertisers - must find a way to also market themselves online - to establish a presence in online communities and networks and through email marketing with their subscribers and readers - methods of communicating with media consumers that, for the most part, newspapers are simply not used to doing... and it has been taking publishers a long time to wrap their heads around the notion that news is now an ongoing multiple-front conversation, not a wire distribution service.
In other news, emarketer reports that banner advertising gets a bum rap for being annoying and ineffective, even though it seems that click-through rates are down - while 31% of respondents in a survey reported clicking on ads, ad viewers responded in other ways: by going to the advertising company's website directly, by seraching for information about the company, or even by looking around for information about the company through social networks or message boards. It seems banner ads may end up with the desired end - ad viewers become aware of the company and may even go on their own to find out about the company - but they're bypassing that click.
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