Online Advertising Undervalued?

On a publishing-related mailing list that he moderates, Peter Brantley highlighted a great interview on Silicon Alley Insider with David Moore, CEO of search ad firm 24/7 Real Media, recently bought by advertising giant WPP. Moore hammered home a point that hit me the first time I saw Imran Khan’s spreadsheet showing the internet’s share of global ad dollars vs. share of viewing time: there’s a lot of upside still in online advertising. This is not breaking news, but well worth circulating more widely:

SAI: Assuming we’re facing an ad slowdown, what’s going to happen
to online ad rates?

Moore: The fact of the matter is the Internet has been either
dramatically underpriced or offline media is dramatically
overpriced. Right now a reader of the Wall Street Journal might be
worth a dollar, but for someone reading the online Journal you get
a nickel. That’s 20 to 1 offline versus online pricing. You need
20 online readers to replace one offline reader. So when you talk a
bout pricing overall I think the web is dramatically underpriced

SAI: Haven’t ad networks played a role in holding down online CPMs?

Moore: I dont think its the networks that are doing it. I haven’t
spoken to anybody who thinks media fragmentation is going to stop.
I think we are dramatically underpriced compared to offline. The
amount of money newpapers and magazines have been getting per
thousand is outrageous. Newpapers and magazines are still getting
roughly 30% of all advertising expenditures–yet if you look at
their share of media usage, they’ve got between 7% and 9%. Thats
why they’re having so much trouble.

SAI: Google is adding video to search advertising. What happens to
video ads in 2008?

Moore: It’s still a small part of the overall online ad spend, but
its the fastest growing part. Advertisers are starting to realize:
“If I spend half million to produce a commercial why just put it on
TV? If they see it online versus on TV–does it diminish?” No!
Godaddy’s strategy was to get a spot rejected from the Super Bowl
and it got 14 million views online.

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