Monday, May 19th, 2008
NYTimes has a great grim story about online advertising this morning.
The prices paid for online ads bought through ad networks dropped 23 percent from March to April, according to PubMatic, an advertising-technology company in Palo Alto, Calif., that runs an online-pricing index. Large Web publishers fared the worst in PubMaticâ”s study, with the prices they received through networks dropping 52 percent.
The article also noted that AOL’s display revs were down 19% in the first quarter, and a downward revision in earnings guidance at WebMD.
The article blames the slump on the looming recession, but there’s definitely something else at work. The online ad marketplace is suffering from the dreaded TMPFAST syndrome. That’s “Too Many Pigs Feeding at the Same Trough” for those of you who haven’t lived through past bursting bubbles. Since the press started proclaiming a couple of years ago that “any idiot with a site can make billions,” new idiots have been lining up to line their pockets. In building their business plans and seducing their eager to be seduced investors, these pigs have focused on the inarguable growth of online advertising (“how can you go wrong in a market that’s growing 30% a year?”), while ignoring the grim reality that millions of similar idiots have been engaged in the same fantasy.
The result won’t be too surprising… and there’ll be lots of sausage to go round for those with an appetite.