That I am not a fan of Web advertising on Web services and blogs is not a big secret. I was roundly pummeled for my over the top comments in April that tried to divorce authors from the idea that they could publish a blog, add AdSense and then wait for the money to roll in. But recent developments make it look like the Web advertising crunch is becoming critical. Inventories are not being sold, prices are dropping dramatically, and it's very likely more and more services reliant on ads are going to feel the pinch, forcing them to rapidly change their business models or close altogether. And they won't be alone. I'd look for many multi-author blogs you've grown to rely on to start thinning the ranks of reporters as ad returns weaken, and some have already started to make such cuts.Back in December of 2007, I expressed my concerns in a piece called "The Web Advertising Bubble Has Got to Pop", where I said:
"The more I think about it, the more obvious it becomes to me that the ad-driven economy, both offline and on, could soon be in dire straights, and companies hoping to cash in need to think of new revenue targets - quick."The reasons I gave for decreasing ad revenues, at the time, stemmed largely from audiences learning to avoid ads, or to use software to block them. I mentioned that even the mighty Google would be susceptible to a crunch, if was to happen, in the online ad market. Like others, I didn't forecast a massive global recession, but as the financial markets have spiked lower, and public markets have been closed to innovative companies, the drive to reach a profit, and do so without relying solely on ads, is stronger than ever.
Last night, Duncan Riley of the Inquisitr summed it up in what had to be a tough piece for him to write, "The Web Ad Apocalypse". He, being one of those bloggers who is heavily reliant on ad revenue, said advertising inventory at his providers has dramatically dropped. He adds, as I did more than a year ago:
"Advertising in blogging and 2.0 services/ apps is on the downward march, and companies that rely on advertising that were marginally profitable, or running at a loss are about to find life that much harder."Duncan's comments are not in isolation. TechCrunch reported today that video ad rates dropped 25% in the last quarter. Be it in video, in banners, or in text ads, the trend is downward.
It is my belief that this problem, while exacerbated by the financial downturn, has been a long time coming. While Google made money hand over fist by pushing sponsored ads alongside native search results, their AdSense product, beloved by many bloggers, is often way off the mark when it comes to contextual advertising - and practically the only memorable online ads are those polluted by nonsensical dancing and misleading graphics that make you think you have a computer virus, or lie to you and say you've won an iPhone by being the 1 millionth visitor. I'd say we've come a long way from the late 90s when we were asked to "Punch the Monkey", but we haven't.
Online ad successes in Web services and blogging are not non-existent, but they are incredibly rare, and they are going to get rarer still. If you're trying to make money on the Web, it's time to think of a different way. If you have a service, get users to pay for it. Find a way to deliver value through premium offerings. Charge monthly fees. But the whole "free plus ads" mantra is going to get worse - and not worth the effort in many cases. That's a major reason I've never run ads here. I knew the trade-off for mucking up the site wasn't going to be worth the pennies. Now it's clear that's likely all I'd ever get.