September 15, 2008
Mint
Spending on Internet advertising is climbing at a healthy clip—rising 20% in the US in the second quarter—and growth forecasts are strong despite the weak economy. But that growth is not being enjoyed by everyone.
The gap is widening between spending on simple search ads, Google Inc.’s core turf, and spending on flashier display ads, which companies such as Yahoo Inc. and Microsoft Corp. had hoped to use to gain ground on Google.
Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: The plain text ads that appear on search-result pages. Search ad spending is on track to reach $10.4 billion (about Rs 46,280 crore) this year, double of what will be spent on display ads, according to research firm Emarketer.
That divergence of fortunes may be bad news for companies counting on a comeback for display ads, which ruled the Web in its early days. Though Yahoo and others say they have seen demand for these ads as they introduce technologies that better target the ads, they have been slow to regain favour.
CreditCards.com is typical. Jody Farmer, vice-president of strategic marketing for the credit card portal, says he has experimented with buying display ads. But as the economy tightens, the site, which spent $30 million on online marketing last year, is focusing on search ads. “We have to be a little more thoughtful about how we spend our money,” he says.
The trend comes as Google rivals Yahoo, Microsoft and Time Warner Inc.’s AOL have invested billions of dollars in building and buying new display ad technology to deliver more relevant and engaging ads to users on their sites and on the sites of other Web publishers. They hope to win back advertisers who have poured money into search ads.
Mark Scholz, global search manager for Hewlett-Packard Co.’s printer division, says that while his budget is relatively flat, he is spending more on search ads by pooling together funds from product groups eager for the extra lift they are accustomed to from search campaigns. “In the event there are budget cuts, I am one of the last ones they go after,” he says.
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