There has been much talk about how the democratizing web has opened a brave new long tail (in Wired Editor Chris Anderson's coinage) world, where many small sites can survive and thrive. But the truth, where internet ad dollars are concerned, is that it seems to be shaping up to look a lot more like the broadcast world, with a handful of players dominating marketers' spending.
TV's Big Four environment has turned into the Big Four online, with Google, Yahoo, MSN and AOL dwarfing other online players. Consider the Interactive Advertising Bureau's analysis of revenue by company size -- the top 10 companies online accounted for 72% of all interactive ad revenue last year, up from 71% in 2004. The top five? They account for more than half of all spending, and that figure has likely been boosted in '06 by the rapid growth of News Corp.'s MySpace. (And the IAB figures exclude Google and Yahoo's ad networks, which monetize the tiniest sites on the internet through text and simple graphical ads.)
Looking for 'tonnage'
It's a startling proportion for a so-called democratized medium -- but as money shifts to online it often comes from TV budgets, where reach is still king. Because of that, clients are demanding the same results from those dollars. "It's analogous to how network TV was used at least in the early days of cable," said Jeff Ratner, senior partner MindShare Interaction. "Network TV was the tonnage."
Google's Gokul Rajarum, for his part, "absolutely" concurs with the Big Four assessment, citing that Google and its contemporaries used to account for even more of the online market share two years ago. But as product manager for Google AdSense, he's found that the top half of the tail has more than doubled from 2,000 sites to 4,000 since November 2003, making more room on the other end in the wake of blogs and community sites.
"People are no longer typing the name of the portal's [URL]. They're using Google to find these sites," he said. "So people will come to us to find information they were otherwise not looking for."
His team also conducted a series of eye-tracking studies in the past year that presented users with the same simple ads on large portal sites and smaller, niche sites. "In all cases, [engagement for] the niche site was just as good and performed as well or better," he said.
OPA touts midsize sites
Indeed, in a scene that seems straight out of the broadcast-cable world, the Online Publishers Association has been bringing around to agencies research that touts the targeting efficiency of its more midsize online sites, such as Condenet or CBS Sportsline.
"We know the power of portals -- they provide incredible reach -- but branded rich-content developers provide a more efficient environment," said Pam Horan, president of the OPA.
Still, the reach of the big players makes them easy go-to places for marketers to spend their ad dollars. What's more, because of the manpower involved in planning, buying and tracking ads across lots of smaller sites, it can seem inherently less efficient to take that approach.
Simon Assaad has felt it. The co-founder of Heavy.com has had to attract advertisers' attention with heavily customized ad deals on his young male-centered site, tailoring large-scale, one-off packages for advertisers to persuade them to pony up the big bucks they normally reserve for the big four or five.
'Safe' online brands
There's a natural inclination when marketers move money online to go with the safe, mass, well-established brands. Once they become more comfortable with the media, "our job is ferreting out who those advertisers are and giving them a reason to move money from Yahoo to Heavy," he said. "We say here's a custom opportunity for you to own something just for our audience. You can't do it with banners or buttons or title sponsorships."
Of course, apart from the operational efficiency in going to one publisher vs. 20 niche publishers, there is also the likelihood that the biggest sites have spent the most on getting the best possible research and have the top sales people and the best behavioral targeting capabilities.
But some companies are looking to even the playing field. One of those is Quantcast, which is able to measure site demographics more deeply by using a pixel technology that tracks what visitors frequent online.
"The idea is if you can reaggregate enough of those niches, then you get an audience that's much more highly targeted," said Konrad Feldman, co-founder of Quantcast. "The challenge is understanding the audience of a site that's too small to be covered in traditional research."
If Scion, for instance, is looking to advertise online, it may make sense that it has a high affinity with MySpace. But Quantcast can actually pinpoint the profiles that have the highest concentration of the type of young audience Scion is seeking.
Of course, the Big Four have been good and are getting better at creating vertical category sites, and that means they're not just one-stop shop buys for scale. "If you're looking at finance sites," said Meridee Alter, senior VP-media director at RPA, "Yahoo Finance may be one of those and so may Forbes and Fortune and others."
Ultimately, said Sarah Fay, president-U.S. of Aegis' interactive ad-agency network, Isobar, "anybody who's making a choice of one over the other, they don't have enough budget to do a good cross section."
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Andrew Hampp contributed to this report.