Doomsayers Turn To Online Ads; Space Is Still Resilient, But Affiliate Deals Could Help

(PaidContent.org)  This story was written by David Kaplan.

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When the economy really started heading downhill last year, the thinking was that the migration of ad budgets from traditional to digital would accelerate. Now, with pessimism settling in after another turbulent week in the financial markets, the doomsayers are turning to online. AdAge looks at the prospects of online publishers to sustain themselves on advertising alone and concludes that most will not. It also revisits the outlook for the 400-plus remnant ad networks and finds that consolidation is likely to begin happening sooner rather than later.

-- Not enough ad dollars to go around?: The notion that there would always be enough online advertising to go around was questioned last October by Beth Comstock, when she was president of Integrated Media at NBC Universal (NYSE: GE). And as the series of revised ad spend forecasts testify, online still looks resilient, even with the growing uncertain business climate. Online advertising is expected to continue to see gains, but now it will be in the low single digits. And search is likely to be the stronger category by dint of its easier accountability. But the downturn is also expected to spur purveyors of display to develop greater ROI metrics and targeting tools, something that *Microsoft* and *AOL* have been stressing lately.

-- The venture spigot: Nevertheless, as AdAge points out, it probably will be tougher for startups to get the kind of funding they've expected over the past few years. That said, others have suggested that venture firms have not been hit as hard as their investment bank brethren and that the flow of dollars to companies that haven't established themselves will continue. However, the continued running of the venture spigot will require those seeking funding to provide greater assurances about their ability to make money from more than just ads. Ross Levinsohn, partner in Velocity Interactive Partners and former CEO of Fox Interactive, tells AdAge: "My concern is the really great concepts that are features, not companies. There isn't enough advertising to support all those features, and in compression times, advertisers tend to flock to safe names and sites that have real traction."

-- E-commerce supplement: As online publishers find more ways to match marketers with their users, the yawning gap that exists between traditional media and the web should begin to narrow. FT cites research from UK media consultant Enders that shows that while newspapers and TV are more heavily reliant on the web to offset declining ad revenues elsewhere, display will be flat in Q3. In addition to overcoming reluctance about turning portions of their sites' ad space to remnant ad nets, websites are also going to supplement advertising with affiliate e-commerce relationships, as YouTube has recently started doing. 


By David Kaplan