Tuesday, June 24, 2008

Search users v Display user - the value difference

The new PWC IAB data has been released - to the end of Q1 2008 - and as usual the industry is still showing robust growth driven mainly by increases in search engine marketing spend.

Search is getting very close as a category to being twice as large as display advertising. Display advertising for the 12 months preceeding March 2008 generated 386,500,000 in revenues. Search, for the same period, brought in 665,750,000


We all know the benefits of search. Accountable, contextually relevant, nimble.

It also has the huge advantages of low barriers to entry AND exit. That is important - the costs and procedure associated with pushing a campaign onto Google/Overture are minimal, and you can take it down if it stops working for you.

Can you do this with display? No. That is not how those publishers work. Generally, once the money is in it's not coming out.

I saw yesterday Michael Arrington was trying to value social networks by using a hybrid model of how many users each network had in a particular territory and factoring in the average revenue generated per user from advertising. Problem was, for AU he used the total figure of search, classifieds, directories and display.

If you drill this down further it becomes interesting.

According to Nielsen Netview there are 11,895,000 Internet users in Australia.

On this number, the average user in a display sense is worth $32.49

Using the same number, the average user in a search sense is worth $55.96

Interestingly, the Display revenues are shared amongst countless publishers - up to 100 - who are competing for revenue.

Search revenues are shared by 2 publishers. Google and Overture. I would estimate conservatively that Google is taking around 90% of the search category revenue. This would put Google's revenue at a figure higher than the total display advertising pie. (upwards of $386m)

So - what can the display publishers do to start to even up the game? How can they continue to compete and increase growth and show the value of the medium against its more accountable, performance based text option?

sources: Neilsen Netview, May 2008, PWC - IAB Online Expenditure Report - March 2008

1 comment:

Robert Barnes said...

I believe a lot of the success for Search is because (at least with Google) there are super efficient and self-service processes and systems, and can therefore appeal to a much wider market, particularly SMEs.

In Display there's a lot of resource overhead on both Agency and Publisher sides. I think this is slowing down the growth of branding $s. It's easier for agencies to go with TV or Print for now because the systems have evolved to be fairly efficient over time. Digital is ripe for more efficiency and dare I say automation.