Nick Denton’s latest forecast for internet businesses is a dark eye opener (though he does admit that it’s in his best interest to throw competitors off the trail). Denton suggests that, “From conglomerates to internet ventures, executives should be planning now on a decline of up to 40% in advertising spending during this cycle.” It’s worth reading the whole thing, but here are a few key things he nails.
First off, everyone’s first response to why the web is going to be okay in a downturn is that it’s more measurable. While that’s all well and good for online direct response businesses, for the big brands (who spend the vast majority of the money on marketing/advertising), it’s simply not. As Denton points out, “it’s still only television advertising that can demonstrate a correlation between spending and a boost to a marketer’s sales.” That’s true (except direct response of course). Clients, of course, are judged by their boss on the sales numbers, not click numbers, so they’re more inclined towards television whether or not you think the correlations are bullshit.
Second, Denton talks about unit types: “Internet publishers have forced marketers into a straightjacket of standard ad units too small for brands to breathe. If the sector is to capture a larger share of brand advertising from magazines and television, the creative needs to have more impact.” While I agree with him, I’m not sure swing the pendulum to unstandardizing is the answer either. At that point you’d just see production costs skyrocket as brands needed to do 200 versions of a banner ad.
Anyway, at the end of the day, I’m kind of thinking that 2009 is going to be the year that there’s finally a banner advertising shakeout and people start to look for other ways of monetizing audiences.