Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Enrichment — 45
suming time is spent online (including Web-based video games).
Yet despite the Internet’s superior consumer targeting features, Internet
advertising still accounts for only 5% of total advertising
monies spent (Credit Suisse estimate – see table 1 and figure 2).
We believe this inequity will continue to rapidly equilibrate,
particularly as long-accumulated inertia within the US advertising
industry breaks. For instance, over the past year, every major advertising
agency has woven their previously separate “new media”
departments into their broader organizational fabrics. Moreover, in
June, the industry’s key provider of ad campaign results and accountability
data, Nielsen/NetRatings, formally disbanded its core
process for collecting media consumption data. Whereas it used to
rely on handwritten consumer surveys logging television viewing
habits, it is now measuring online streaming video consumption
and out-of-home TV viewing, and will migrate to a completely
electronic information-gathering format by 2011.
Digital marketing’s next phase
While Internet search remains digital marketing’s largest and most
developed segment, particularly in terms of ad spend, the industry
has evolved enormously over the past year. Social networking and
online video have exploded onto the scene to an extent that many
Fortune 500 companies are not only re-examining, but also reinventing
their marketing strategies. The common denominator
between the two is individual expression, which can be a powerful
economic force if aggregated and organized effectively, and this is
likely to happen as digital technologies evolve. Corporations are
losing significant control of the information flow that tells consumers
of product availability and, most importantly, shapes opinions.
Figure 1
Source: Credit Suisse
Online advertising vs. total spend
Although 21st century consumers are steadily migrating online, digital
platforms still account for only a fraction of total spend. The driving forces
are secular and the expansion potential is vast.
in thousand USD
350
300
250
200
150
100
50
0
1995
1996
1997
Internet ad spend
1998
1999
2000
2001
2002
Total ad spend
2003
2004
2005
2006
2007E
Early in July, social networking leader MySpace accounted for over
4.5% of all Internet page views, versus merely 0.1% two years before.
Over the past year, MySpace moved from near irrelevance to become
the Internet’s second most-trafficked site, hosting 75% of
the traffic of the entire Yahoo network – more than AOL, MSN and
Google. As a user-based tool, social networking has expanded at
a faster rate than Internet search – and MySpace has expanded
faster than Google at equivalent stages. When News Corp acquired
MySpace for USD 580 million in 2005, it was widely criticized as
having overpaid, but now the deal is regarded by many interested
parties as one of the best technology acquisitions in recent history.
Traditional ad platforms disrupted by social networking: TV, cable,
magazines, directory, direct marketing, radio.
Disrupted-platform 2005 US advertising spend: USD 168 billion.
In February 2005, YouTube was a startup with an office over a
pizza restaurant. In June 2006, it was a service from which consumers
viewed over 100 million videos per day and that had just
signed a contract with General Electric’s NBC Universal television
network to run specially designed commercial videos for the company’s
most popular television shows. YouTube’s co-founders are
former colleagues from the early days of electronic payment leader
PayPal. By 2010, nearly half of US households may regularly view
video content over the Internet (comScore). According to the Online
Publishers Association, news and entertainment videos are the
most frequently watched online videos. These also happen to be
the television industry’s most lucrative advertising segments.
Traditional ad platforms disrupted: TV, cable.
Disrupted-platform 2005 US advertising spend: USD 64 billion.