Live from eTail 2004: Search Advertising Supply/Demand Imbalance Could Drive Up Rates

Hollywood, FL–Online marketers would best serve themselves by optimizing their search advertising investments to help level out the imbalance between supply and demand, said Ken Cassar, director of strategic analysis for Nielsen/Net Ratings, during his kick-off speech at the eTail 2004 conference. The current lack of supply for search advertising outlets is driving up ad rates, he said.

“The number of searches per person and the number of people who search are driving the growth of online advertising,” Cassar explained. “But this isn’t growth we can count on year after year. So this portends an era of rising prices.”

He said that although research has shown that search advertising supply increased 30% between 2002 and 2003, “that’s a bit lower than Forrester Research’s forecast, and that may explain the overall increase in pricing.”

In addressing other facets of the online retail industry, Nielsen said that during the past six year growth has grown on par with the online population. “Most categories,” he said, “track with growth in the online population, with home and fashion growing more quickly than the overall sector. The industry overall is as healthy as it’s ever been since I’ve been tracking it. Senior management buys into it. A lot of companies [and online units of companies] are profitable and self-sustaining—and that’s the biggest difference since 1998; it’s a much healthier environment.”

But not everything aspect is in excellent health. Online banner advertising has been relatively flat, and retail banner advertising has fallen off, Cassar said. He noted, for example, how Amazon.com has channeled funds that formerly went into banner advertising to free shipping and search advertising.

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