Online advertising rates: are we seeing the collapse yet?
The Google stock dip makes it painfully clear that we might indeed be looking at a “race to the bottom” in online advertising rates. This weekend, analyst Eric Jackson of Ironfire Capital pointed out that the value of advertising has been dropping quarter after quarter for five quarters now, and that the end is not in sight. The shift to mobile, according to Jackson, will cause sorrow for every advertising based model, because mobile ads are even cheaper than desktop ads. Says Jackson: Google and Facebook face essentially the same problem. He added: if Facebook stock can halve based on this, who’s to say that Google stock can’t tumble as well?
Over at the excellent Monday Note, Frédéric Filloux (general manager digital operations for Les Echos Groupe) thinks that the ever lower advertising yield will essentially split content on the web in two.
Clickfarms versus quality content
On one side will be the sites with a high number of clicks but a low Average Revenue Per User, such as Huffington Post and other ‘content farms’.
On the other side of the gap are the sites with a high ARPU but much lower volume, like The Economist, Financial Times, etcetera. Filloux thinks this will have three big consequences
- A rise in paid-for-performance advertising
- A rise in alternate formats beyond traditional display — for better or worse
- And a split between volume-driven and quality-driven digital properties.
To an extent, the third trend is a consequence of the other two.
The alternate formats are of course ‘sponsored stories’ or ‘native ads’ – advertising that was produced with editorial help from the publisher, and that is almost indistinguishable from editiorial content. Filloux thinks it will be the model of the future, and he points to Henry Blodget’s Business Insider as a trailblazer in this field.
Is there a future for online, advertising based business model?
Photo: that’s a controlled demolition! http://www.flickr.com/photos/biscuitsmlp/2600996972/sizes/z/in/photostream/
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