No Internet Bubble?

    November 20, 2005

Another Internet Bubble? Not according to John Battelle writing in The New York Times Friday.

John believes that we are in a new era of internet opportunity … a grounded, stable and vibrant opportunity … called Web 2.0. He gives these four reasons:

  1. The Web has become a proven business platform.
  2. Business entry is cheap, therefore financiers aren’t driving decisions this time.
  3. The advent of search advertising sydication which helps give sites with visitors instant revenue.
  4. No wild IPO’s, more acquisitions of hot startup’s by stable comapnies.

It’s a great article and sums up the current reality of the Web and business.

However, I think there is one huge potential pitfall; continued success of those pesky text ads by the search engines and their thousands of syndication partners.

What if people stopped clicking on those ads? Every ad phase on the internet eventually suffered from click blindness. Over time the web visitor knows where the ads are and clicks them less.

The article mentions banners as something that didn’t work. Well, actually they did work and were effective with over 1% click rates from around 1996 – 2000. From the very beginning when put up the first web ad banner they began a gradual click rate decline. When they got below 1% is when all of us started to get worried.

I don’t think you can say that banners were not effective in driving business. They were … and YES they still are, just not with the super high click percentages that they were previously. For example, we still sell banners at the iEntry Network including on this site and WebProNews. And we continue to deliver quality leads and business to our advertisers too.

Our advertisers also get the huge advantage of brand building which … not withstanding ridiculous self-serving studies to the contrary … is not delivered within a text ad. These text ads often do not even contain the advertisers name. Just think about it, are you going to remember one of those Google ads that you didn’t click on? Not likely. But you may remember an advertiser and their main pitch in a banner ad … because it is an image. It’s obvious … and that’s why Madison Avenue is continuing to experiment with advanced interactive and visually appealing ads. They see the Web as another media platform that can be part of a companies branding and direct marketing mix.

Am I against text ads? No … we use them to boost our banner advertisers. They help get clicks but those clicks are not somehow better because they came from a text promotion. Targeted leads are targeted leads … as far as the advertiser is concerned. My point is that text ads may not forever be the blockbuster they are now.

The predominant internet advertising model is built on the premise that text ads will continue to be clicked. Click percentages have already fallen significantly for Google text ads and they are likely to continue falling. Have you noticed that there are many more ads on Google searches now? Google increased the number of ads displayed in the last quarter in order to offset lower click rates. Yes, click blindness may be affecting search engine text ads too.

Does this mean we are actually in an internet bubble? Not exactly.

However, I believe we are in an internet advertising bubble again based on the vunerability of text ads … but the internet has much more going for it than just search engine advertising. The text ad bubble may deflate, but internet business will not.

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Rich Ord is the CEO of iEntry, Inc. which publishes over 200 websites and email newsletters.

Rich also publishes his blog WebProBlog which focuses on internet business and marketing trends.