Saturday, May 19, 2007

Health Warning as Internet Advertising is Bought-up

In the struggle for advantage in the digital advertising boom the search engines are buying up online advertising companies, sometimes for eye-popping prices. This week Microsoft agreed to buy the online advertising company Aqauantive for $6 billion, which is Microsoft’s largest acquisition ever. This month Google bought DoubleClick, a competitor of Aquantive, for $3.1 billion. , outbidding Microsoft.
Yahoo recently bought the 80 percent of Right Media that it did not already own for $680 million. The company operates an auction marketplace in which advertisers and publishers buy and sell online advertising space in real time. Also this week, AOL bought Third Screen Media, which operates an ad network for mobile phones, and Adtech, an online advertising firm in Germany. AOL was the first Internet portal to buy a major advertising network,, in 2004.

According to eMarketer, online adverts accounted for 5.8 percent of the $285 billion spent on advertising in the United States in 2006 and it estimates that the online share will rise to 10.2 percent by 2010. As dollars move online, the big Internet companies see a chance to capture an ever-larger portion of the advertising dollar.

Google, which leads the online advertising world, is among those trying to make inroads into Microsoft’s traditional software business by offering word processing, spreadsheets and other software free. Quantive, which is based in Seattle, will bring many advertisers to Microsoft.
The technology helps Web publishers earn the most for the ad space available on their sites.

The recent deals are also blurring the lines between the big Internet companies and traditional advertising companies and last week the WPP Group bought 24/7 Real Media, another DoubleClick competitor, for $649 million, to compete better with Internet companies.

As we see business models shifting to advertising based free content these shifts become even more alarming. Imagine if music, videos and even books where available free to download as long as you accepted the advertising feeds. Just like ITV and the other broadcasters it have done for years. What will that do to people who are still trying to sell in the traditional model and what will be the impact on price?