Web Advertising Headed For Affiliate Marketing Scheme?

By Greg Crites | Published Jan 23, 2009

According to the report Nothing But Net: Outlook for Global Internet Stocks in 2009, released on Monday (Jan. 5, 2009) by J.P. Morgan Securities Inc., performance-based advertising has gained a larger and larger share of the total online advertising market over the past five years. In particular, the report isolates online video, social networking and Brand Ads for growth analysis.

And why not PBA? Who wins when some convoluted methodology is put in place whereby every site becomes an affilliate marketer? No up front conventional brand ad placement costs, the onus of generating leads is shifted to the ad host, no remuneration for the creativity behind a site that generates millions of CPM’s—the advertiser wins! Another lurch toward institutionalized chiseling and no-risk corporate shenanigans.

Performance Based Advertising

In the midst of an economic downturn of the size and scope the world faces today, brand advertising departments are looking hard at ROI (return on investment) - in particular, performance-based advertising. And the consensus among many is "CPM" (Cost per Thousand) or Cost per impression basis has been downgraded to some grey area between pure brand recognition and performance-based advertising.

If this assessment reflects the true mind-set of brands, 2009 could be a tough year for online video and social sites. The largest sites, MySpace and Facebook, both heavily reliant on brand advertising, have all revised downward their brand based ad revenue forecast’s. FIM, Fox interactive Media, projects search revenue ad growth. While Facebook is concentrating on user growth and has revised overall advertising revenue projections downward.

Both companies are experimenting with self-serve ad offerings. With the economy stagnant, any type of revenue enhancement strategy is likely on the table.

What About Online Video?

For online video, which is typically sold on a CPM basis and is generally geared to traditional brand advertisers, analysts are split in ad revenue projections. Most cite estimates that a switch to search-related advertising will grow at a steady rate, while CPM branding will decline.

Unlike several industry observers who in recent weeks have cited online video as a strong spot in the online ad economy, J.P. Morgan Internet and entertainment equity analyst Imran Khan, claims that “the medium has yet to establish a sustainable business model, despite the massive growth in consumer consumption. Advertisers have “failed to understand the consumer demand,” said Khan during a conference call held Monday.

The Brand Attitude

Advertisers want a predictable audience and zero-risk. As their sales slump they look increasingly at their advertising portals to do the job for them. Which in effect makes the ad provider an affiliate marketing arm of the brand. To some degree, this has always been true, but the advertiser was paid for placement and fired for poor performance. In this economy, the prevailing attitude among brands seems more like ‘place my brand, sell my product, and I’ll toss you a bone’.

A link to a PDF of entire 56 page J. P. Morgan report can be found at the bottom of this article.