Bad News: Online Advertising Declines in Value
August 1, 2012
Is there trouble ahead for Google revenue? Slate prompts that question with its post, “The Decline of Google’s (and Everybody’s) Ad Business.” Writer Hugh Pickens notes that, unlike print ads, online advertising loses value over time. Google’s reported cost-per-click revenue has been dropping more each quarter—by 16% most recently, 12% last quarter, and 8% the quarter before that. The write up observes:
“The daily and stubborn reality for everybody building businesses on the strength of Web advertising is that the value of digital ads decreases every quarter, a consequence of their simultaneous ineffectiveness and efficiency, writes Michael Wolff. ‘The nature of people’s behavior on the Web and of how they interact with advertising, as well as the character of those ads themselves and their inability to command attention, has meant a marked decline in advertising’s impact.’ This isn’t just Google’s problem. Overall, Internet advertising has decreased in value over the years as online advertising continues its race to the bottom.”
Google is actually in a good position to weather this storm, since it has widened its revenue stream well beyond AdWords. Many other companies, however, must be scrambling for another way to keep the coffers full.
Cynthia Murrell, July 31, 2012