Revisiting The Question: What's The Impact Of A Soft Economy To Digital Media?

Came across this poster last week. I stopped for a couple of minutes to see what' was that all about but I didn't have time tor read on. I still think the best ad medium is outdoor, if only I can use my cell phone to scan soI can learn more about this once I get home or they can push something to me. That's experiential marketing.

Some thinks that it is safe to assume that as the overall drop in advertising activities would include online ads, but that's not what the data is showing. As the economy softens, advertisers will look even more closely at how well their ad dollars are doing.  Increasingly, marketers are looking to ad networks-vertical, behavioral and otherwise-to buy more targeted advertising.  Before we get into ad networks, here's a piece of interesting data, the North American videogame industry sold $1.7 billion worth of hardware and software in the month of March (a report by NPD Group) This represents a 51% increase from the same period in 2007. If you are in the gaming industry, you'd never know that the U.S. economy was under distress. There are many bright spots in the digital word. Videogame, Adnetworks and Social Media are booming.

That could be a boon to the likes of AOL and Yahoo, which recently scooped up a series of ad networks and exchanges in their bid to become one-stop-shops for marketers. According to Imran Khan, an analyst at JPMorgan Chase that covers this space, said that ad networks "are growing much faster than the general graphical advertising industry." Khan estimates that the top 20 ad networks earned around $2 billion in 2007, which accounts for 14% of the display market.

Why are ad networks thriving? Cheap, targeted advertising. Networks charge much lower CPMs (as low as $4) than giant Web portals like Yahoo and MSN ($40 and up). It's no surprise, then, that ad growth on premium sites has slowed compared to the overall Web economy. Margaret Clerkin, the chief executive of Mindshare Interaction, said it's about efficiency. "While the home pages (of premium sites) are still very effective media buys, the price tags on them have become a little outrageous for many advertisers...there are other ways to amass that type of audience fairly quickly that are more efficient," she said. NY TImes has the full story. As I wrote about this last week, there are still plenty of opportunities to jump into this space, but the entry cost is high.

Outside the ad networks, there are a couple dozens of stealth start-ups that can shape the future. One is 9 months old company with a super team from Google. The company , currently in stealth mode, is called Mechanical Zoo and is working on a social search applications. The privately funded company has raised about $750,000 in convertible debt from angel investors, including ex-colleagues and friends. Two institutional investors have committed another $1.25 million to Mechanical Zoo, but the founders may raise a series A round of funding in lieu of that money. The name Mechanical Zoo is an homage to the mechanical workings of its application, as well as several animal-named products that the company plans to introduce over time.

The interesting thing is these folks left Google because according to them it can be tough inside the search giant to make new, big things happen, as well as to marshal enough talent away from the company's main search and advertising products to build new services.  Yahoo fell because of that reason. That's a universal truth even with no exception to Google.