Online Ads Market

I have been meaning to do a summary of online Ad spending and the trends for a while…So it was good to see this piece in WSJ by Emily Steel that had a lot of numbers and trends:

So the current numbers are “Internet advertising has grown into a $16.9 billion industry — 5.9% of the $285 billion total U.S. advertising market in 2006, up from 4.7% in 2005, according to the Interactive Advertising Bureau.”

The article has a good cast of characters that make up the online ads space. Below is my summary of all the species:

Paid Search

  1. Search Sites: Up until now, paid search has benefited just a handful of players, particularly Google and Yahoo because those ads have mostly attracted smaller businesses that don’t use ad agencies.
  2. SEO Agencies: With bigger companies becoming more involved in paid search, agencies and search-marketing firms are playing a greater role. Also firms have sprung up to help marketers design their Web sites to make it easier for search engines to understand what information appears there. The goal of this “search-engine optimization” is for a company’s Web site to show up at the top of a search engine’s free results listings when a person is looking for information related to that particular company or industry.

Branding Ads (banner ads, animated adds,  etc.)

  1. Digital Ad agencies: ads are usually designed by digital ad agencies and then transported to various Web sites through a circuitous route often involving a number of technology-focused companies. It is this area that has seen most of the acquisition activity in recent weeks, as bigger ad players try to streamline the online advertising process. For example, Avenue A/Razorfish bought ad space on a total of 863 individual sites last year for its clients, which include Kraft Foods Inc., Walt Disney Co. and Nike Inc. To line up all that space, Avenue A/Razorfish used firms that deal with hundreds or thousands of Web sites.
  2. Ad Networks: Ad networks, buy space from sites and resell it to advertisers at a premium. Among the major ad networks are Advertising.com, acquired in 2004 by Time Warner Inc.’s AOL, and 24/7 Real Media.
  3. Ad-serving firms: Ad-serving firms are technology companies that get the ads from the advertiser to the Web sites that the ad network firms have lined up. The top two ad-serving companies are DoubleClick and Atlas, another unit of aQuantive. Ad-serving companies save the digital information that creates an online ad on a computer server and then deliver that data to the sites where marketers bought advertising space. This lets ad agencies change the contents of an online ad or where it runs on a site by switching that digital information on the computer server instead of communicating with each of the hundreds of sites where an ad might appear.

Some ad-serving companies also have ad-network arms. DoubleClick, for example, provides both these services for advertisers and Web sites.

Based on the action in the space you can see where the online ad market is going towards…while paid search is the cash cow, Branding seems to be future opportunity…Looking at the numbers there is huge room for growth.

(Numbers etc. borrowed heavily from the WSJ piece).

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