There's a lot of good reason for gloom and doom in the newspaper business. Unfortunately, that pessimism seems to extend to the potential for online advertising to significantly contribute to revenue and the bottom line. "Heck, the Web is only about 5 percent of revenue today," newspaper executives fret. "How much longer do we have to wait for it to grow and save us?"
The way these pessimists see it, the glass is half-empty (or maybe 5 percent empty). But there are others, more visionary, who believe that the online advertising glass is filling quickly. And the latest evidence is right there in the newspapers' business pages today.
That's because Microsoft is acquiring online advertising firm aQuantive for $6 billion, on the heels of Google's acquisition of DoubleClick for $3.1 billion and other, similar deals for online ad companies. These are important bets on the future of advertising: these are the companies that serve up the bulk of the Web's display ads and offer tracking and analysis of advertising that mass advertising vehicles like newspapers can only dream of.
What do Microsoft and Google know that newspaper can't seem to grasp? That online advertising is turning into a very big business. Big advertisers are moving their ad budgets online. According to The New York Times, quoting Nielsen/NetRatings Ad Relevance, AT&T spent $79 million on online ads in the first quarter, up nearly 50 percent from a year ago. Ford Motor spent $29 million online in the first quarter, quadruple the rate a year ago. See a trend?
“We’ve reached a tipping point,” Bryan Wiener, chief executive of 360i, a search marketing company, told The Times. “It’s not just talk anymore. The flood of dollars online is starting to accelerate to match the amount of time we spend online.”
Or this, from a Microsoft exec: “This is about the opportunity,” said Kevin Johnson, president of Microsoft’s platforms and services division. “We believe that there are tens of billions of dollars in economic value that can be generated in this industry, and we are committed to getting a bigger share of it.”
Bingo. We're in the very early stages of Web advertising, and there's nothing but growth ahead. That's what Microsoft, Google and others know, and are betting on--while newspaper execs complain that the online business can't seem to catch up to the losses on the print side.
Oh, and why didn't a big newspaper company, or perhaps a consortium of them, step forward and buy DoubleClick or aQuantive? Good question. It would have been a very smart acquisition, a real bet on the future. The technology companies seem to have that vision. The newspaper companies apparently don't.
A few years ago, I was privy to a conversation among board members of a newspaper-centric media outfit about the possibility of buying a major Web company (I have to fudge a few details here to protect confidences). One short-sighted board member protested, "It would cost us hundreds of millions of dollars." But a smarter exec said, "Yeah, but if we don't do it, in a year it will cost us a couple billion dollars." He couldn't convince the others, and it turns out he guessed low: The Web company was sold a year later for several billion dollars--to another technology company. Once again, the newspaper industry failed to pull the trigger on the future. Some things never change.
Great set of points here Mark. One of the reason I think this is so is that many of the newspaper company see firms like DoubleClick or aQuantive as being, well, 'technology' companies. They don't see them as be fundamental core businesses. Instead they're stuck in the 'tech silo'.
I'd argue that most media companies today have technological base. Television? It's elaborate cameras and editorial suites. That's technology.
That's why I always seem to hear that are in online advertising are "into computers".
Posted by: kwalsh | May 19, 2007 at 06:08 PM
To be fair, they didn't *totally* miss the boat--several newspaper companies thought far enough ahead to buy CareerBuilder, Apartments. com and Cars.com.
But I agree with you, Mark, that they're not being as smart about display and text-based ads as they are about classified ads.
Posted by: Mary Specht | May 22, 2007 at 04:01 PM