Could Internet Ad Rates Spiral Down?

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Internet ad rates have been rising faster then some customers can handle. Affordablity is website impressions is starting to become a major issue for some marketers.

Some ad impressions on certain MSN sections are up ten-fold. That raises the issue of whether further aggressive increases can be maintained. The rapid rise of internet advertising may be at stake.

Online advertising revenue grew about 31% this year to $16.4 billion. Projections from research firm EMarketer are that the figure will rise 19% in 2007 to $19.5 billion. But some of that relies on the ability to continue the increase in internet ad rates.

According to The New York Times: "rates are expected to grow at a far lower rate, said Greg Smith, chief operating officer of Neo@Ogilvy, North America, an interactive advertising agency that serves clients like Allstate and Cisco Systems."

There is some strong evidence that vertical sites and sections that cover widely attractive topics like health and finance will continue to get higher rates.But, as rates rise, many advertisers will turn to less expensive alternatives.

If cheap inventory comes online as pageviews across the internet growth, the increase of revenue at large portals like MSN, Yahoo!, and AOL could be undermined. And, that could undercut their financial performance in the coming year.

Douglas A. McIntyre can be reached at [email protected]. He does not own stock in companies that he writes about.