Online Advertisers Resume Paying Big Bucks

Wednesday Apr 14th 2010 by Kenneth Corbin
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A new sign of hope -- and hints on what's working for Web marketers -- means good news for a resurgent online ad sector and small business.

How much is a home page worth to an advertiser? For some of the biggest portals on the Web, selling a full-page takeover ad on high-traffic days can net upwards of $1 million, according to financial analysis firm Broadpoint AmTech.

But it's not just the big boys that are cashing in. A prominent industry-wide survey recently found that U.S. online advertisers spent a record $6.3 billion in the fourth quarter of 2009, up 2.6 percent from the year-earlier period, and up 14 percent from the previous quarter. That uptick capped off a year that saw overall online ad spending dip 3.4 percent from 2008.

The report from the Interactive Advertising Bureau and its accounting partner PricewaterhouseCoopers was greeted by industry observers as a sign that online advertising and the closely associated e-commerce industry are on the mend.

That certainly comes as good news for large ad-based firms like Google (NASDAQ: GOOG) and Yahoo (NASDAQ: YHOO), which are both due to report earnings in the next week and received positive analyst notes from ratings agency Standard & Poor's on the reports of improve online ad spending. But it's also an encouraging sign that smaller Web shops are seeing enough of an uptick in the market to return to advertising, as well as for the many online retailers and publishers who place ads on their own sites.

The IAB limited its report to the United States, but another prominent forecaster offered a similarly hopeful outlook for the global sector. ZenithOptimedia is projecting ad spending across all media to climb 2.2 percent in 2010, raising its previous forecast of 0.9 percent growth.

As it eyes a resurgent online ad economy, Broadpoint has launched a new research project exploring the home page advertising activities of four of the most heavily trafficked sites on the Web -- AOL, Yahoo, MSN and YouTube. Chief among its findings: Online marketers are willing to shell out some big bucks for premium placement on these sites' front pages.

"Home page ad impressions represent some of the most valuable ad inventory online," analyst Ben Schachter wrote in the report.

Bets on Rich Media, Performance-based Ads

As the ad sector shows increasing signs of stabilization, Broadpoint identified notable differences in the way each of its subjects aims to monetize its most valuable property -- and potentially give smaller e-commerce marketers and publishers hints on how best to direct their own advertising initiatives.

YouTube, for instance, relies heavily on media buys from entertainment companies looking to promote movies and other content, and it was predictably the most likely site to place video ads on its home page.

AOL was the only other site that placed video ads on its home page, though they accounted for just 1.6 percent of its total placements. Excluding YouTube, Schachter cited AOL as "by far the most creative" of the bunch in its efforts to experiment with rich media and to "make a splash" following its spinoff from Time Warner. Broadpoint found that nearly 23 percent of AOL home page ads were rich-media, expandable placements, the type that often forces a person to click the close icon to view the content on the page.

"While this likely helped ingratiate AOL amongst the advertising agency community, only time will tell how the strategy may go over with users, given that some find these types of ad units intrusive," Schachter said.

MSN took a different tack, preferring to stock its home page with performance-based, direct-response ads. Broadband's analysis found that direct-response ads accounted for 57 percent of media buys on MSN's home page.

Yahoo continues to be a favorite destination for advertisers running a branding campaign. Broadpoint found that about a third of the ads on Yahoo's home page in the first quarter were strictly for branding purposes, the most of any of the big four save for YouTube. In contrast with MSN, Yahoo held little appeal for marketers running direct-response campaigns.

Overall, 93 percent of the home page ads Broadpoint analyzed contained some form of rich media, defined as an ad with some interactive quality (video, expansion, etc.) beyond a static banner or text ad.

"We view this as a very bullish indicator for homepage ad buys and a positive read-through for display advertising more broadly," Schachter said.

By industry, telecom and media companies were the largest advertising segment, together accounting for 27 percent of the ads served on the four sites' home pages. For telecom, much of the spending came from wireless firms, led by AT&T and Sprint, advertising their newest smartphone. Media companies often took to the large sites, particularly YouTube, to promote the new release of a new movie.

Financial services firms, particularly outfits like LowerMyBills.com and LendingTree.com, were the second leading industry, accounting for 14 percent of the home page ads Broadpoint analyzed.

Kenneth Corbin is an associate editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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