Wednesday, September 12, 2007

Is the up online ad market ending?

Over at Silicon Alley Insider, they're on online ad market death watch, reading numerous tea leaves and coming away with the conclusion that, based on the subprime mortgage collapse and other factors, the industry is in for a downturn. The latest signal is an announcement by online ad network Burst Media, which said early today that a couple of key clients have cancelled expected campaigns due to budget constraints. It then goes onto say, solemnly, "The 2000 ad crash began exactly this way: anecdotal reports of weakness from minor players that were dismissed as 'isolated' and 'company specific'." The part of this line of thinking I'm buying is that the financial services sector is bound to pull back on the dancing aliens it uses to sell exotic mortgages. However, the current online ad market differs from 2000 in some extremely substantial ways. By the time of the dot-com bust in the first half of 2000, the market was overhyped in a way it isn't now—advertisers were pouring money into the medium even though they had scant evidence that it was working. They also hadn't yet gotten religion about the fact that consumers, were, in fact, changing their media habits. This time around, clients realize that for all its warts, this is ultimately the most accountable medium that has ever existed, and with new, digitally-driven consumer media habits clearly entrenched, even if a downturn in ad spending happens, it's doubtful that advertisers will retrench by putting money allocated for online into other media. It will be the other way around. I should also point out that the posts I talked about above are written by Henry Blodget, who has a very personal incentive to get calling a downturn in the online ad market right.

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