May 18th, 2007
It’s clear now that the media and advertising industries, which thanks to Google and Web 2.0 now include the software industry, will be dominated by a new breed of company — the vertically integrated media and advertising company. Google’s AdWords created a new model by combining a media company — Google’s search results and its network of AdSense affiliate websites — with an advertising agency, i.e. advertisers buy ads directly from Google through its AdWords platform. Google also revolutionized the media and advertising business by introducing a data-driven dynamic marketplace into what had once been a market based largely on human relationships.
With Microsoft today announcing the acquisition of aQuantive — a digital marketing, ad serving, and ad network company — following on the heals of Google’s acquisition of DoubleClick, Yahoo’s acquisition of Right Media, and WPP’s acquisition of 24/7 Real Media (which includes a content network), the trend is clear. These vertically integrated media and advertising companies will battle it out for control of all of the dollars in the online advertising value chain.
AOL’s acquisition of Advertising.com several years ago fits in this same category, a highly prescient move in retrospect. Also following this path is the CBS Interactive Audience Network, which will syndicate CBS content and share ad revenue with sites, effectively creating an ad network.
Like Google with AdSense, all of these companies can make money off of advertising run on other media company properties. The evolution of an industry like this could indeed only take place on the “Web,” because the economics of all the players have become deeply entangled.
All of these vertically integrated media and advertising companies are positioning themselves to profit from the $70 billion in TV advertising that will eventually flood into online advertising.
The big challenge is figuring out how to efficiently spend all of those brand dollars, half of which have traditionally been wasted. The big players have acquired the assets they need. Now comes the hard part.