Internet Ads Cross the $4 Billion Mark

In the O'Reilly Radar paper Web 2.0 Principles and Best Practices, one of the six “market drivers of Web 2.0” is the abundance of new revenue opportunities for web site and applications, thanks to a 37% percent growth in online advertising in the first six months of 2006 over the same period in 2005. According to the report, spending on online advertising now exceeds business magazine ad spending and is set to soon surpass consumer magazine ad spending.

Here's the graph that accompanies that point:

Confirming the O'Reilly observation is the just-released Interactive Advertising Bureau's report that internet advertising revenues have surpassed the $4 billion mark for the third quarter of 2006. Here's their graph:

Jason Calacanis believes that internet ad spending, high as it is, will only increase, citing the following reasons:

  • There are more advertisers online today
  • It's getting easier to spend money online
  • Google Adsense/Adwords (a huge part of the point above)
  • Yahoo, MSN, AOL, and Google reaching scale, which in turn allows major advertisers to reach comparable audience sizes to TV
  • Audiences shifting from TV, radio, and magazines to the Internet

What does this all mean? Here's my take:

  • Watch for an increase in “long tail” marketing. It may get you only a slice of the pie, but that pie's very big now, and continuing to grow. That's not just me saying it, it's also in O'Reilly's Web 2.0 paper. (See? I just saved you $375.)
  • Watch for an increase in “long tail” web applications and sites. In the 1990s, the “planetary alignment” of the CD-ROM, RAD tools, desktop adoption and a willingness to outsource development made it possible for an ecosystem of small niche desktop application developers and customers to flourish — I know, I was a developer in that ecosystem. The current alignment of broadband adoption, Ajax, scripting languages, frameworks like Ruby on Rails and internet advertising makes it possible for a similar ecosystem of web application developers and web site writers and their customers and readers. Think of it would've been possible to build it before the age of AdSense, but it wouldn't be making $15K a month.