The growth in online advertising spend continues unabated. A recent report by eMarketer suggests that US online advertising spend will grow from $17 billion in 2006 to $42 billion in 2011 … and this is still only 13% of total media spend.
But what is more interesting is some of the figures that lie behind the headlines.
In 2005 over 90% of online advertising was shared among just five companies. That left less than 10% to be fought over by every other ad-driven website. Not a great picture for small-content website owners.
But don’t go and switch off your server yet. Things are changing.
If you analyze the recent company figures from the biggest Internet players, you will notice that their rate of growth in advertising income is slower than that at which the online advertising market is growing. For example, advertising income for AOL and Yahoo grew at 16% and 8% respectively in the second quarter of 2007, while online advertising spend grew by 28.5% over the same period.
Put another way, a lot of the new advertising spend coming into the market is no longer going to the gorillas.
So where is it going?
In the early days of the Internet, advertisers were focused solely on the number of people who viewed their ads. This strategy obviously favored the big portals with thousands of pages of general content and millions of readers every day. Now advertisers are getting much smarter at understanding the potential of the Web as an advertising medium and their strategies are changing to reflect this.
Advertisers are focusing far more on the quality and relevance of their audience than on volume. They are happy to reach fewer people if those individuals are more likely to buy.
This shift to quality and relevance favors the specialist information publishers. More ad revenue is flowing down, and this trend is set to continue well into the future.
The challenge big advertisers face is identifying and reaching these relevant publications, because often they are very small. This challenge is starting to be addressed by aggregation of specialist sites by third parties such as Adify, Gorilla Nation and SubHub.
After years of being undervalued, niche content publishers are in demand. It will take time for the shift to happen, so hang in there to reap the rewards.
Conclusion
Online advertising revenues are starting to filter down to smaller, specialist information websites as advertisers seek more targeted audiences. This trend will continue well into the future and will be helped by new companies that aggregate niche audiences, making it easier for advertisers to reach their target markets.