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History of online advertising
editOnline advertising began in 1994 when HotWire sold the first banner ads to several advertisers.[1]Revenue in the United States grew to an estimated $7.1 billion in 2001 or about 3.1 percent of overall advertising spending. The dot-com bust destroyed or weakened many of the early online advertising industry players and reduced the demand for online advertising and related services.
The industry regained momentum by 2004 as the business model for “Web 2.0” came together.[2]A number of businesses emerged that facilitated the buying and selling of advertising space on web pages.Entities that operated web portals settled on the traditional “free-tv” model: generate traffic by giving away the content and sell that traffic to advertisers. Most web sites, with the exception of transaction ones such as eBay, generate the preponderance of their revenues from the sale of advertising inventory—the eyeballs that view space allocated for promotions—to advertisers. In the first half of 2007 alone, advertisers in the US spent more than $10 billion advertising on websites.[3]That was about 14 percent of all advertising spending.
The portion of advertising that is done online will increase significantly over time as more devices such as mobile telephones and televisions are connected to the Internet and people spend more time on these devices. The valuations that the capital markets are placing on businesses related to online advertising are consistent with this prediction. Google has had a seven-fold increase in its market value from August 2004 when it was valued at $29 billion to $215 billion in December 2007. During 2007 several companies in the online advertising market were purchased at multiples of 10-15 times annual revenues.[4][5][6]
The online advertising industry burst into the public eye in 2007. Google’s sky-rocketing stock price and its forays into industries such as word processing software, online payments, and mobile telephones drew significant attention. More than 500 articles on Google appeared in the New York Times, Wall St. Journal and the Financial Times during the year. The U.S. Federal Trade Commission and the European Commission launched in-depth antitrust investigations into Google’s acquisition of DoubleClick, which provides software technology and services to online advertisers and publishers.[7]Privacy concerns also came to the fore in 2007 as consumers, government agencies and the media started focusing on the massive amount of personal data that online advertising companies were storing and using.[8][9]
Reference
edit- ^ Barbara K. Kaye and Norman J. Medoff, Just A Click Away: Advertising on the Internet (Massachussetts: Allyn and Bacon, 2001).
- ^ 'Web 2.0' Another Bubble?, The Wall Street Journal, December 27, 2006.
- ^ IAB Internet Advertising Revenue Report, October 2006, http://www.iab.net/media/file/IAB_PwC_2007Q2.pdf.
- ^ Louis Story and Miguel Helft, Google Buys an Online Ad Firm for $3.1 Billion, New York Times, April 14, 2007. Microsoft purchased aQuantive at a multiple of about 13. Peter Galli, Microsoft's aQuantive Buy Shows Big Ad Plans,, eWeek.com, May 18, 2007.
- ^ Peter Galli, Microsoft's aQuantive Buy Shows Big Ad Plans,, eWeek.com, May 18, 2007.
- ^ Michael Liedtke, Yahoo snaps up Right Media for $680M , USA Today, April 30, 2007
- ^ European Commission Press Release, Mergers: Commission opens in-depth investigation into Google's proposed take over of DoubleClick, November 13, 2007
- ^ Vidya Ram, EU Turns Spotlight On Google, Forbes, May 28, 2007; Steve Lohr, Google Deal Said to Bring U.S. Scrutiny, New York Times, May 29, 2007
- ^ Darren Waters, Google privacy policy ‘is vague’, BBC News, May 31, 2007.