By Jim McCarthy Feb 26, 2009 0 comments

Advertising in Decline? You think?

Techcrunch is, for those of you who spend more time working with actual scripts than with javascript, one of the most influential blogs in the extended Silicon Valley/Tech community, with lots of interesting news and perspectives.

It’s a smartly written site for smart people, but it’s funny how sometimes being part of a group, however clever, can blind you to something that’s pretty obvious.

Here, Sarah Lacy talks about the dawning realization that even online advertising may begin to decline.  Here’s the key tidbit:

“It wasn’t too many months ago that saying online advertising would decline in 2009 was enough to get you laughed at in the blogosphere, mocked on Twitter, and have Eric Schmidt roll his eyes and explain, again, why Google ads were such a better value than traditional media.

Flash forward to this week and the Interactive Advertising Bureau big wigs are predicting whole businesses dependent on online ads could go belly up, and researcher IDC has completely reversed its growth estimates. No longer will online ads grow 10% in 2009, says the firm. IDC now predicts a 5% drop in revenues in the first quarter that could get worse in the second. Fingers crossed for the second half of the year.”

Sadly, crossing your fingers isn’t going to be much good.  There will be ups and downs in this marketplace of course, but the long term trend is down, at least without some major innovation in providing value to advertisers (which to her credit, is part of Sarah’s point.)

Here’s how we said it here on Live 2.0 a couple months ago:

“What makes you think your advertising is valuable in a world of consumers awash in information and hostile to advertising?

When I was at GeoCities (lo, these many years ago) we routinely got $20 CPM (cost per thousand) for regular old banner ads.  That means on a big site like ours, we could have lots of advertisers paying us $10 to $50k a month to be present on our site.

Today, the industry standard (the real one, not the one on rate cards) has dropped to about $1 CPM, which means those same advertisers would be worth $500 to $2500 a month to us.  Not enough to pay for our beer and chips around the foosball table.”

To go a step further, advertising is in the midst of migration to a zero-profit industry.  That means whole industries, provided they don’t essentially turn themselves into something new, can become valueless.

This shouldn’t shock you.  There’s no money to be made in Telegrams anymore, right?  It’s a medium that became irrelevant.

So this isn’t just a cyclical downturn, folks.  It’s a permanent state of decline unless and until people selling advertising can develop a way to actually reach buyers on behalf of advertisers.

Funny thing is that if you’ve been trying to sell Broadway tickets or fill a jazz club for the last five years, you already know this!

So on behalf of the live entertainment industry, Sarah, I’m waving my hand (like Henry Blodgett, but more permanently pessimistic and not just because of the economy) too!

Ad sellers, don’t blame the economy.  Figure out what you have to do to deliver what advertisers want:  ways to reach customers.

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