Ad Networks: Prepare for a Bloodbath Next Year
ADOTAS – Is the end nigh?
According to Jeff Lanctot, Razorfish’s chief strategy officer, “dozens and dozens” of ad networks will fail in the coming economic crunch. peHUB interviewed Lanctot for insight into what online advertisers may be contending with this year and next. He didn’t hold back.
As ADOTAS and other industry pubs have noted in recent months, ad networks are facing an uphill climb. Lanctot predicted that several would be lost in the journey up and out of the downturn:
“One interesting place to watch is the ad network business. It’s been a real boom time for them, and frankly, it’s been an easy business in which to succeed. There are probably more than 300 ad networks up and running and they aren’t differentiated on technology. It’s all about arbitrage; they buy inventory for a low price and sell it for a higher price and add little value in between. I think there will be real shakeup in that business over the next year. In a downturn, it becomes imperative for people to become more efficient, and in an efficient marketplace, I don’t think there is room for these players. I’d guess that dozens and dozens of ad networks won’t make it through the next year.”
Lanctot also spoke darkly about current and future advertising budget cuts:
“[In the] beginning in Q2, I was hearing pretty consistently, across all categories, that Ford and Chrysler and GM were pulling back their ad budgets. And that’s gotten progressively worse in terms of pullback of spend. … over last month, every product category is taking a new look at budgets for the fourth quarter and for 2009,” he told peHUB.
There is a silver lining. Lanctot predicts that a lot of overall ad cutbacks will assist the migration of advertisers from traditional to online advertising.
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