Estimates Put Internet Advertising at $21 Billion in U.S., $45 Billion Globally

Two reports are out today on the size of the Internet advertising market. The Interactive Advertising Bureau has a preliminary estimate of $21.1 billion for U.S. Internet ads in 2007, a 25 percent increase over 2006. (For the fourth quarter of 2007, it is estimating $5.7 billion for the size of the industry, up from $5.2 billion in the third quarter).

Meanwhile, the Kelsey Group puts U.S. Internet advertising at $22.5 billion for 2007 (IDC, as previously reported, is at the high end with $25.5 billion).

The Kelsey Group also provides a global estimate of $45 billion for Internet advertising, which is 7.4 percent of the total $600 billion global advertising market. That compares to a 6.1 percent share of global advertising for online ads in 2006. And for what it’s worth (not much) it is forecasting global internet advertising to reach $147 billion in 2012. These forecasts are always wrong, but the 2007 numbers are helpful.

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UK Online Ad Network Adconion Gets $80 Million Funding; Expanding Into U.S.

All the ad networks are filling their coffers before the recession spreads to the online advertising industry, or at least that's the reasoning most of them are giving. Now, Adconion, the UK-based online ad network which is also now expanding into U.S., has raised a big second round of $80 million, led by Index Ventures and previous investor Wellington Partners. Adconion plans to use a quarter of its new funding to expand its U.S. operations—half to invest in new technology and the rest for acquisitions, reports WSJ. Adconion announced its first round last year in April.

The company was founded in 2004, and sells ads on about 350 publishers sites, including the Drudge Report, Sony's (NYSE: SNE) video site Crackle, and Demand Media. There was a rumor doing the rounds last year that Fox Interactive was in talks with Adconion to buy it, but seems like it didn't pan out, or tat the rumors were false.

European Ad Firm AdLink For Sale; Assigns Morgan Stanley For Possible U.S. Sale: Report

European online advertising network and marketing firm AdLink Group, part of Germany's ISP firm United Internet, has been put up for sale, possibly to a U.S.-based company, reports Frankfurter Allgemeine Zeitung, picked up by AFX. (The German language story is here). The story says UI is hoping for a triple digital millions from the sale...Adlink is valued at about 400 million Euros, while 84.3 percent is owned by United Internet.

AdLink also owns Sedo, the online marketplace for buying and selling domain names and websites; and Composite Digital, a provider of e-mail data and profiling tools.

The company has hired Morgan Stanley, the U.S. investment bank in a deliberate attempt to find an American buyer, the story says. My guess is AOL, which has been trying to buy a European online ad operation for a while, might be a buyer. It tried to buy TradeDoubler for $900 million early last year but withdrew its bid after shareholder opposition. Then later it bought Adtech AG, an international online ad-serving company based in Frankfurt, Germany, and then earlier this year announced buying UK-based affiliate marketing network Buy.at.

IAB Approves Privacy Guidelines For Interactive Advertising; ‘Roadmap’ May Not Thrill FTC

Late last year, the Federal Trade Commission, rather than impose regulations on online advertising, proposed self-policing for internet marketers and sites. The Interactive Advertising Bureau was already working on its own guidelines and today, at its annual meeting in Phoenix, the board of directors approved "privacy principles" to be followed by its members and submitted to the FTC by the end of the month. The IAB's principles (we've posted all five here) are more relaxed than the FTC's suggestions—for instance, requiring "meaningful notice" rather than a "prominent statement." IAB describes them "as a roadmap for all industry actors who collect and/or use data to deliver relevant ads online or via other platforms."

IAB CEO Randall Rothenberg stressed the differences in his statement: "IAB members understand the relationship between consumers and companies is built on trust. As a result, IAB members have long been committed to guarding consumers' information and privacy. Based on the industry's experience, we believe the FTC is too rigid on the matters of notice and choice." Release.

CNET News.com: "… the IAB guidelines would make it less obvious for consumers that their data is being collected for advertising, with a notice buried somewhere on the Web site where the privacy practices are kept. Also, the IAB favors directing consumers to other places where they can opt out if they don't want their information gathered or used for advertising."

Marc Rotenberg, executive director of the Electronic Privacy Information Center, told News.com (parent CNET (NSDQ: CNET) is an IAB member.): "The FTC didn't just put the foxes in charge of the hen house, the Commission offered up the blueprints."

Publishers To Have Tough Time On Online Ad Revs With Increasing Fragmentation: AvenueA

Avenue A/Razorfish, the online ad agency which is part of aQuantive, which is now part of Microsoft (NSDQ: MSFT), has come out with its annual report on the state of the digital advertising, and bursts the bubble, sort of, on mobile advertising, social media and Web video, and calling them as "not ready for prime-time," "a work in progress" and "a ways away" from standardization, respectively. At least that what Jeff Lanctot, SVP at Avenue A, told Reuters.

With the recession and its looking effect on the online ad industry, current trends will make it difficult for major Web publishers to increase ad revenue in 2008, as marketers divide their budgets across more sites, the report said.  The agency spent client money on more than 1,800 sites in 2007, compared with 863 the previous year, and handled $735 million in ad budgets in 2007, up 36 percent.

The money share spent on big Web portals dropped from 24 percent in 2006 to 19 percent, while search share rose to 31 percent from 28 percent, vertical sites rose to 39 percent from 37 percent, and spending on ad networks was flat at 11 percent, reports News.com.

Vertical content properties were the great beneficiaries of much of the wealth. In addition to share shifts, there was great pricing-growth disparity between verticals, up an average of 30 percent, and portals, whose CPMs grew only 7 percent. The average CPM increase across all online media was 20 percent, reports AdAge.  The report can be downloaded here.

Google Launching Beta Of Adsense For Video; To Use YouTube-Like Overlays

Following a pilot program that began last May, Google has announced the beta launch of its Adsense for video offering. The company will use the same InVideo, overlay ads that it uses to run ads on YouTube. At types include video-based blocks sold on a CPM basis, and CPC text overlays. For now, the new offering will be available to video publishers that do a minimum of 1 million streams per month. The sites must be in English and based in the US. Going forward, the company plans to expand the program geographically and to publishers of different sizes. More details in the announcement. Read more

YouTubes Advertising Coming-Out Party

It used to be only television networks that could get senior advertising executives to drop their plans for an afternoon or evening to party, but now gatherings hosted by the likes of Google and Facebook are the place to be seen.

Google hosted an invitation-only event today at a three-story club space called Terminal 5 in a warehouse area on the western edge of Manhattan. Google employees mingled and ate smores with executives from some of the largest ad agencies and big-budget advertisers. Called “The YouTube Videocracy,” it was Google’s first large advertiser event, and it was choreographed to be somewhat of a lovefest for Google.

Executives from Hewlett Packard, Pepsi and General Mills met with reporters beforehand alongside Google executives and said they had made substantial commitments to running ads on YouTube.

Doug Moore, vice president of advertising and media at General Mills, said his company’s brands had always had great television ads, and that he viewed YouTube as “a natural bridge from what has always worked for us in the past to what we believe will work in the future.” Read more

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@ Sports Marketing 2.0: For Brands, Targeting Matters???But Size Still Matters More

Many conferences with "2.0" in the title invariably feature marketers venting their frustrations about their desire to target online communities, while expressing discomfort with the lack of control such sites have over members' individual comments and content. Panelists at the Sports Marketing 2.0 Summit offered their own take about dealing with big brands:

-- Pat Coyle, executive director-Digital Business, Indianapolis Colts: Despite offering tighter control than individual fan blogs devoted to sports, brands still want to know: where's the mass? Coyle spoke about advertisers' views toward the social net he's set up for the Colts: "We thought we were doing pretty well with 20,000 members, but the big brands have judged us too small."

-- David Birnbaum, founder, CEO of Takkle: The high school sports community has benefited from its partnerships with larger media companies like Time Inc.'s Sports Illustrated magazine and marketing partnerships with firms like Wasserman Media. All that, plus a wealth of data, if positioned just right, can make the demand for higher pageviews diminish. "We capture very valuable information: what kind of sports they play, their positions, the sneakers they wear, where they live. P&G wanted to created an online video contest. They could have gone to MySpace, but P&G wanted to target cheerleaders and so they came to us. They knew that they wouldn't have to do any sifting if they came to us."

-- Buck Krawczyk, VP-marketing, Powered: The Austin, TX-based tech branding firm had worked for a digital photography client. Unfortunately, the users were so excited by an online demonstration that they decided to set up a Yahoo group of their own, away from the client's ability to target consumers on their own site. "Ultimately, conversion to purchase is a high motivator. That's what our brands look for. That's why we were so disappointed when our audience went over to Yahoo (NSDQ: YHOO). It just got a way for us. So our job is to keep them in the fold."

-- Ed Sullivan, CEO, Infield Parking: A Nascar social net site started by Sullivan and race car driver Dale Earnhardt, Jr., Infield Parking attracts racing fans who have more commonality as a group compared to other sports sites. Part of that is due to the overarching Southern culture that most Nascar fans are immersed in. Sullivan: "Nascar fans identify with each other, they have a chip on their shoulder. When we formed this, [Earnhardt Jr.] felt that he could do this with less risk than other drivers could and help drive mass to the site. Dale liked the control - on MySpace, he'd be taking down fake Earnhardt profiles. And that ability to create a niche within sports makes us stand out to brands. If you want Nascar, this is it."

Dave Morgan, AOL’s EVP-Global Advertising Strategy, Leaving For Startup World Again

Dave Morgan, the founder of online advertising firms RealMedia (which later became 24/7RealMedia and sold to WPP for $649 million) and Tacoda, is leaving AOL (NYSE: TWX) exactly three months after being appointed EVP-Global Advertising Strategy, according to an internal memo we obtained. The official announcement will come later today. Morgan came to AOL after he sold his behavioral advertising company Tacoda to it in September, for about $275 million.

The memo, sent by Ron Grant, COO of AOL, outlines a rather cordial parting of ways, and when I reached Morgan last evening by phone, he confirmed his departure, and echoed the thoughts. From the text of the memo: 

"Dave has worked side by side with Curt to make sure the integration of Tacoda—his baby—went smoothly...Dave helped us define and implement our vision for Platform-A. We've benefited greatly from his enthusiasm...and we will continue to do so as we bring Platform-A to market this year. In fact, Dave will be working with me to identify start-up opportunities that are strategic to AOL and Platform-A.. Dave, though, is an entrepreneur at heart, and so it didn't really surprise me that he wanted to get back in the start-up game again and we'll look forward to working with him in the future."

Morgan told me he is looking at a couple of ideas in the online advertising field, and will possibly even look at AOL funding some part of it, if it makes sense. But a departure three months after his new appointment at AOL will raise more than a few eyebrows, especially as the big Internet media companies are in turmoil and tussle for consolidation.  This is the second major departure from AOL's ad team announced in the last week: Discovery just hired Kathleen Kayse as EVP of digital media sales..she also came from Platform-A where she was EVP of marketing solutions and led ad sales and partnerships.

AOL will not fill the role created for Morgan. Curt Viebranz is currently the president of Platform-A.

These moves come after parent Time Warner announced its intention last week to split AOL into an access business and an audience/advertising business. There is rampant speculation that all of this means AOL will sell off the audience business, or get in bed with Google (NSDQ: GOOG) in a bigger way, especially if the MSFT-YHOO deal ever happens.

David adds: I met with Morgan two weeks ago to discuss his views on the state of the online ad industry in general and AOL's ability to continue its string of investments and acquisitions amid widespread recessionary fears. Not giving any hint of his plans to leave his current post, he said companies like AOL will have to be more aggressive about looking outside the U.S. to extend its ad network. "If you believe in the long-term market opportunity, the down markets are when you want to make your strongest moves." Guess he is making his…

WGA Strike: Ad Agency React: ‘The Aftermath Begins’; Upfront Presentations Remain In Doubt

While broadcast media buyers and marketers are likely to feel relieved by the end of the work stoppage, some contend that too much damage has been done for things to return to normal. Chris Boothe, a president at Publicis Groupe's Starcom USA, tells AdAge that "the aftermath begins" once the strike is completely wrapped up, adding that repercussions to the TV ad business will continue to be felt for some time. Some effects stemming from the way the labor action will permanently affect the way TV ad time is bought. Among the immediate expectations are:

-- There will be less original programming overall, with reality TV assuming a greater share of prime-time.

-- Rather than schedule most of the new season for a big fall opening, many new shows will see staggered debuts. Networks will likely begin to roll out more shows during Q4.

-- Audience erosion has been a fact of life for the networks the past few years. But the strike may have sped up that trend. According to Sanford Bernstein analyst Michael Nathanson, live prime-time audiences between the ages of 18 and 49 fell 11 percent through Jan. 27, with CBS (NYSE: CBS) down 19.6 percent, while ABC dropped 15.2 percent and NBC saw a decrease 13.8 percent. Thanks to popular unscripted shows like American Idol, Fox was the only one to gain, albeit a modest 3.7 percent. Cable has grown and as more people by DVRs, live prime-time ratings might not be able to make a comeback.

-- Development of new shows have been held up during the strike. Therefore, the networks might not have a reason to hold the annual bombast that is the upfront. Between the start of the negotiations in May and the end in end in early summer, marketers placed $9.2 billion in advertising for the 2007 fall season. With some networks left wondering whether they will have to produce "make-goods" - returning advertisers' money for shows that failed to hit guaranteed ratings points - the shape of this year's upfront is very much in doubt.

B&C: Only Fox appears committed to hosting its major upfront presentation this year. NBC continues to waver on its upfront plans. The way it looks right now, the network's fall preview will have a decidedly more scaled back quality.

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