It's Alive! Web Ad Revenues Hit Record Amid Media Thaw

Wednesday, 17 November 2010 20:05

It's Alive! Web Ad Revenues Hit Record Amid Media Thaw

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Don’t look now, but the media nuclear winter of the last few years appears to be ending.

After a hair-raising period that saw widespread layoffs, heavy financial losses,

and famous magazines selling for $1, media companies are starting to hire again as losses turn to profits. That’s not to say everything’s hunky-dory, but the latest evidence for a media thaw arrived Wednesday when IAB released its quarterly online ad revenue numbers.

In the third quarter of 2010, U.S. Internet advertising revenues hit a record $6.4 billion, a 17% increase over the same quarter in 2009, according to the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC). The robust numbers suggest that online ad revenues may be resuming the upward path of the mid-2000’s, before stalling in 2008 and falling in 2009 during the depths of the recession.

The numbers also add credence to Morgan Stanley internet analyst Mary Meeker’s contention that the web ad economy has significant upside potential, perhaps to the tune of an eye-popping $50 billion. In a presentation Tuesday at the Web 2.0 conference in San Francisco, Meeker argued that the amount of money marketers spend on online advertising should be much higher given how much time consumers spend on the web.

Still, it’s probably too early to start breaking out the champagne.

“One day it’s hopeful and another day we’re still going down the drain,” said Rafat Ali, the founder of PaidContent and an expert on the economics of the web. “But the larger inevitable trend is that online advertising is going to keep growing bigger.” Ali said traditional news players have opportunities in local and mobile commerce, as well as the deal space, where companies like Groupon have exploded in the last year.

Over the last decade, media executives (not to mention the rank-and-file journalists who work for them) have come to the realization that online ad spending may never make up for the print ad revenues lost thanks to the internet revolution. Put simply, the web destroyed newspapers’ cash cow — the classified ad — and gave consumers access to content they previously had to pay for. This one-two punch devastated the newspaper and magazine industries. Online web advertising, media pundits lamented, would henceforth only produce pennies, nickels and maybe dimes for every lost dollar of print advertising.

Most people agree that those lost dollars won’t be replaced, at least not in the short term, but if Meeker is right — and the IAB numbers do have people in a good mood today — then the future for online media business models may not be as bleak as they appeared only a few years ago.

“Advertisers are shifting more of their brand messaging online, accounting for this welcome surge in a difficult economy,” David Silverman, a partner at PwC, said in a statement accompanying the numbers. “This trend reflects the accelerating shift in consumer behavior towards the internet and away from traditional media.”

Some news organizations are certainly feeling more confident. Big media companies like Bloomberg, News Corp. and even The New York Times are hiring, as are upstarts like Politico and reboots like Forbes.

“Not all of the old jobs will come back,” Ali said. “But new kinds of jobs will be created.”

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