TELECOM Digest OnLine - Sorted: Ad Costs on the Web Are Rising, but Perhaps a Bit Irrationally

Ad Costs on the Web Are Rising, but Perhaps a Bit Irrationally

Monty Solomon (
Wed, 27 Dec 2006 20:20:30 -0500


Ad Costs on the Web Are Rising, but Perhaps a Bit Irrationally

December 25, 2006

MEDIA executives and investors get a pleasant neck ache from watching
the skyward path of online advertising revenues. But for those who
have to pay for advertising, the trend is bringing some anxiety.

Prices for some online advertising are going up, and some retailers
and brand marketers say the big question mark hanging over 2007 is
whether publishers will be so emboldened by a strong advertising
market that they will raise the prices of ads sharply.

"Everybody's excited about online advertising," said Mark Vadon, chief
executive of the online jeweler Blue Nile. "But the rates keep going
up and up and up."

Joanne Bradford, MSN's corporate vice president and chief media
officer, would not specify the extent to which her site will raise
prices next year, but she said that during the last two years "there's
been unbelievable price pressure."

For instance, Ms. Bradford said that for the front pages of some
popular MSN sections, prices rose tenfold. "That settled down quite a
bit, and now we're starting to see price pressure more evenly spread
across the network," she said.

According to Greg Stuart, chief executive of the Interactive
Advertising Bureau, an industry group that represents online media
companies, there are no reliable statistics on average advertising
rates, in part because advertising agencies often negotiate special
rates with publishers and keep those deals close to the vest. "Rates
are going up, but effectiveness is going up too," he said, suggesting
consumers were now more likely to make a purchase or request
additional information than in previous years.

Online advertising revenues are expected to grow by 31 percent to
$16.4 billion this year, according to a report by eMarketer, an
Internet consultancy. That spending represents 6 percent of the
overall advertising market. Revenues for 2007, eMarketer said, would
most likely rise 19 percent, to $19.5 billion.

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