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The breadth of U.S. advertisers across virtuallyt ad revenues failed to set a new record.
==Efficiency and Effectiveness== MALUNO GANDUO
Advertising on the Internet has the dual benefit of being generally more efficient and effective compared to other media channels. A standard advertising cost metric is CPM or Cost per Thousand Impressions. For example, a $1 CPM equates to a cost of $1 to reach 1,000 theoretical viewers or readers (theoretical because not everyone will read or look at an advertisement). Internet CPM rates in 2006 averaged $6, much less than most traditional media (see table below). Compounding this lower cost is the effectiveness of Internet advertising, which can be measured using a variety of tracking methods. An advertiser can tell, for example, who clicked on an Internet ad and even who bought a product or service during an internet session. Companies such as Google and Yahoo! have leveraged the measure-ability of the Internet to charge advertisers for clicks rather than impressions, further attracting advertisers with its pay-for-performance model. On the other hand, it is extremely difficult to measure how effectively television, newspaper, radio or magazine ads drive sales.
|TV (Network, Cable)||$18|
|Radio (Network, Spot)||$7|
Click fraud involves a person or automated script that clicks on a Pay-per-click ad in order to generate a charge without actually having interest in the target ad. Pay-per-click (PPC) Internet ad companies face threats from click fraud, which artificially inflate the prices paid by advertisers and benefit the advertising companies such as Yahoo! and Google, which generate revenue from clicks. Both of these companies have settled several lawsuits claiming that the company did not do enough to stem click fraud. It is currently under debate how much of their PPC business is fraudulent.
Video games and mobile phones are two channels that may threaten or accelerate Internet advertising companies. Console video games (i.e., PlayStation, Xbox, and Wii) are increasingly connected, and Internet-based games themselves (e.g., large online multiplayer games) have risen in popularity. In addition, mobile phones are one of the most popular devices in the world and have increased in capabilities through technology such as 3G, which enables a wide range of activity such as email, Internet browsing, and multimedia capabilities. Advertising on these channels is a small but rapidly growing trend. Internet advertising companies such as MSN and Yahoo! may benefit from these trends if they build capabilities to leverage these channels; otherwise, these emerging media may take share away from "traditional" Internet advertising as advertisers seek innovative ways to reach potential customers--for instance, mobile advertising has the benefit of being location-based and highly targetable. Internet video advertising is also growing in popularity and companies such as MODAVOX INC (MDVX) are assisting publishers of online videos in monetizing online videos. Whereas traditional TV advertising has relied on per-show and DMA targeting, internet video marketing can tailor advertising delivery on a per-user basis, according to the interests, viewing habits, demographics, time and / or location of every individual viewer. Internet video delivery also allows insertion parameters to be adjusted and optimized to maximize performance on the fly.
Internet penetration and total page views in the U.S. have slowed in recent months, potentially signaling channel maturation. Internet advertising depends heavily on online traffic and if these trends continue, advertising spend on this may not grow at the same rate as recently (18% per year from 2001-2006).
|Year||Revenue ($ million)||Y-o-Y Growth|