Internet Advertising Overview

I firmly believe that all the advertising models that exist are on an intersection course with each other. In the resulting mashup or crashup there will be some models that thrive and others that will become obsolete. Internet advertising is increasing by leaps and bounds and is already a multi-billion dollar industry with a world wide presence.

It would be tough to not argue that the Internet advertising models will be a significant influencer in this new world. I would go as far as to say that models that work on the Internet are most likely to be the ones that will survive. The Internet is littered with examples of industries and areas that the Internet has entered into and eventually significantly changed. Print media comes to mind or retail marketing.

Certainly this does not imply the imminent demise of the currently existing  ad companies, platforms  and models in non Internet Advertising area. But we can see from other industries what has happened to them. For example at the height of the first Internet boom there was a lot of hue and cry about the demise of the bricks and mortar retailers. Although a number did in fact die the industry did not become all e-tailing instead of retailing. However retailing certainly changed significantly.


In light of that I am starting a series on Internet Advertising. This article will give the basics of the industry from a revenue perspective. Follow on articles will delve deeper into various areas.

What is Internet Advertising?

Internet advertising is composed of a number of components. these are :

1. Search Advertising - think of a Google search and the resulting promoted ads

2. Display advertising - think of banner ads that you see on many websites

3. Video Advertising  - ads that are inserted in video streams that you watch

4. Mobile Advertising - all of the above but now on a website ( one point of difference about the mobile versus the web is that there are a lot more in app ads as well as web browser based ads)

Please note the above definitions are broad examples and there are many differences that fall in each of the categories and some more categories as shown further in pie charts from IAB.. I am just trying to give a broad idea at this stage in line 

So whats the revenues?

Simple version ..... a lot and increasing tremendously. Real numbers from IAB are 31.4 Billion dollars in 2011. Heres a nice graphic from them showing the last two years growth being at 21.9% 

Source:

http://www.iab.net/media/file/IAB_Internet_Advertising_Revenue_Report_FY_2011.pdf

As a point of comparison the television advertising industry is 75 Billion dollars in the US alone. But as another point of comparison the TV advertising industry is growing at 2-3% ...a slight difference. and the forecast for the Internet Advertising industry is 10+ % again for 2012 

Whats the breakup of the revenues ?

Once again IAB conveniently provides data for 2010 and 2011 

Basically search is the major revenue driver in the Internet advertising industry. Display banners is next biggest and video is growing pretty fast. 

What are differences between Internet advertising and TV advertising ?

1. Well first the obvious comment that TV advertising is bigger in revenue
2.  and that Internet advertising is growing a lot faster
3. Scale The number of transactions is lot higher in Internet advertising even though the value of each transaction is clearly lower 
4. Scope. Internet advertising is a global phenomena. This is not completely true as the publishers particularly in display and video can be regional. But on a comparative scale its a much more global industry
5. Automation- there is a lot more automation in Internet advertising via ad exchanges and Real Time Bidding platforms

How does Internet Advertising relate to other advertising  areas ?

 

Source Magnaglobal_US_forecast_2012

As you can see from MagnaGlobals research overall Internet advertising is showing the greatest growth. Almost as interesting is to look what areas the advertising revenue is decreasing such as in Newspapers and directories.The basic point that may not come as a surprise to anyone is that the Internet sector is growing the most!

Are all Internet Ads equal in value?  

Well the fact that I am asking the question implies that they are not. Here is an example showing how much difference in value there is between various types of Internet ads, classic display ( banner), rich media and then finally video. 

Source http://www.cmswire.com/cms/customer-experience/rich-media-video-ads-make-bigger-impression-than-standard-banners-015047.php

The graphic shows and increase in lift. There is a correlated with this an increase in CPM, basically the value that is placed for such an advertisement.