Last May, ad congolomerate WPP bought 24/7 Real Media, the second-largest online ad network. Now GroupM, WPP’s giant ad buying unit ($59 billlion in global billings) is adopting 24/7’s search advertising system. We talked to 24/7 CEO David J. Moore (SAI 100 No. 16) about the switch and his outlook for online ad rates in 2008:
Silicon Alley Insider: Is this why WPP bought 24/7?
Moore: Their real interest was in our search technology. They did not have a standard platform to use on a worldwide basis to manage search campaigns for the clients they had. We made the decision to merge our search business into GroupM, and GroupM adopted Decide DNA for their platform.
SAI: Does this change how 24/7 competes in the marketplace?
Moore: 24/7 still operates as a separate company. We compete with Doublecick on a day-to-day basis. We compete with other networks for advertising dollars, but now we have better access to the GroupM family of companies.
SAI: It appears that Microsoft-Yahoo is inevitable. How will this impact you?
Moore:I think that the combination will actually be good for advertisers because it will level the playing field between Google and Microsoft. Advertisers want options. A monopoly is not good for the advertiser because they have less negotiating power. The Microsoft-Yahoo deal puts a larger competitor up against Google than what they currently have. Between Microsoft and Yahoo they will have a larger percentage of the display market overall.
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 about pricing overall I think the web is dramatically underpriced already.
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 realise: “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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