Last week I provided my notes on the SaaS workshop that was organized as part of the recent Pacific Crest technology conference in Vail. Today I’ll talk about online advertising which was another major theme at the conference.
- Online advertising continues to grow in spurts. Ad budgets remain volatile even though the presenters at the conference talked about a 10% online ad budget growth during 2010. Spending looks better for 4Q10 and into 1Q11, assuming that the economy doesn’t continue to decelerate. Campaign planning continues to be on a quarter by quarter basis. The online display ad market will grow by 20% this year, faster than search advertising (12-15%). This is one of the highest growth rates of all types of online advertising. Only social advertising surpasses with an annual growth of over 30% but the social advertising market is much smaller. These growth rates corroborate the 17% growth rate that Forrester recently provided for that market. Mobile and social are becoming increasingly important drivers.
- Today 14% of the total ad dollars are going to online. Advertisers continue to cancel their print buys and move their budgets to online. Larger companies are moving to online faster than in previous years. TV planners are trying to determine how to move money to online video. Most online ad programs are coming from agencies rather than directly from advertisers.
- In late 2009 and early 2010 the display market moved away from ad networks and towards Demand Side Platforms (DSPs) and ad exchanges because marketers wanted to be efficient and consumers demonstrated that they wanted to visit multiple sites to find the most appropriate content. Data will play an increasingly important role in the rapidly evolving display ad technology. Its use will lead to improved targeting and higher accuracy in bidding. Today even though Real Time Bidding (RTB) is consuming much of the discussion around display ad technology, none of the DSPs are real time yet. Marketers don’t perceive a significant difference in the ad effectiveness of the Yahoo and Google ad exchanges though the two exchanges employ different bidding strategies. Search is still the best suited method for performance-based selling, lead and generation.
- While the technology panelists who sat on the future technology trends panel identified mobile internet as the top trend to watch for (the other being cloud-based application delivery) the advertising executives in the online advertising panel and workshop claimed that the next two years the shift from print to mobile will not be as fast as the shift from print to desktop online. However, the shift to mobile will continue gaining steam. There are several issues resulting in the slower move to mobile including the problem with redeeming coupons through mobile devices. Ad tech is viewed as a means to improve the margins of online advertising.
The information presented at the conference’s online advertising panels has the following implication for Trident:
- Ad tech for display advertising will continue to evolve rapidly with new Demand Side and Supply Side platforms emerging. Online advertising agencies are racing to develop the right infrastructures to take full advantage of the emerging technology. Turn (www.turn.com), one of our portfolio companies, is emerging as one of the key DSPs.
- Data will be playing an increasingly important role in ad targeting and pricing decisions.
- Mobile advertising in its various forms (in-app, in-game, in-browser) continues to move from experimentation to mainstream though still the budgets are not reaching the projected levels.
- Advertising in social media is attracting strong attention and budgets are increasing rapidly. We have invested in Extole (www.extole.com) that is developing a SaaS social marketing platform and is becoming the system of record for its customers’ social graph.