If you find it odd that both Comcast and a consortium of four newspapers today launched plans for ad networks, it’s worth re-reading a couple of quotes from David Moore, CEO of 24/7 Realmedia, whom WPP picked up for $649M last year.
From an SAI interview:
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.
It’s worth noting that at $649M, 24/7 Realmedia will probably be a steal over time. WPP’s $59B in annual billings is 10-20% of the total advertising pie, and as more of that goes online, they need something cohesive to manage it all, especially the search part, which accounts for 40% of the online pie.
Either way, if Moore is right, then you understand why I think online ads will take over TV sooner than later.
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