Spent two days at AdTech in San Francisco this week, and formed an opinion on the current state of the online advertising market:
- The industry continues to explode and everyone is upbeat. Over 9,000 attendees and 500 exhibitors and every exhibitor I talked to said the show is going very well for them. One exhibitor (a co-reg network) told me that they see a 25% increase in their business every time they exhibit at AdTech. Of chief concern for industry mgmt is recruiting -- everyone is getting poached.
- Search is topping out. Demand for Google/Yahoo inventory has increased to the point where the price doesn't make sense for many advertisers. Furthermore, there's a lot of talk about click fraud, which combined with typical "black box" inventory (you don't know where your ad shows) results in advertiser budgets being sucked up in no time at all. MSN, AOL and Yahoo were NOT there, and Google make a paltry showing.
- As a result, advertisers are looking into new channels such as social networking, gaming, video, branded entertainment, etc. But it's experimental still.
- Also as a result, SEO/SEM has become its own industry; figuring out how to advertise effectively in Search is that hard. So many companies selling optimization techniques and software ...
- Spyware/adware is going away (little presence there, and hidden at that).
- Contextual/behavioral is HUGE; everyone wants it but with the Search issues and diminishing spyware/adware inventory, where's it coming from? Lots of pent-up demand, it seems. Many ad networks are offering it, but their technology approach offers them shallow profiling compared to spyware/adware.
- Local advertising is really looking good now, I'm happy to say. Local advertisers are spending money across a broad spectrum of keywords, and publishers like me finally have a ready source of advertisers to tap into (via networks).
- The "marketplace" concept is gaining in popularity, which directly matches publishers with advertisers (rather than the black box approach of conventional networks). I think this is a good thing for the industry, but it needs to evolve to keywords.
- Finally, Mark Kvamme of Sequoia Capital thinks the online advertising market will be worth $35B in 2008, a BOLD prediction. He says 32% of people are reached by TV, to which 38% of ad dollars are allocated. The Web, meanwhile, reaches 32% of the population but captures a mere 5% of ad dollars.