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Internet Portals Reap Huge Profits From Ads

David Utter
Expert Author
Published: 2005-11-16

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Massive demand for prime placement on sites like MSN, Yahoo, and AOL means rates have skyrocketed, advertisers have to plan out campaigns well in advance, and smaller niche sites are profiting from the overflow.

MSN sums up the situation succinctly in a WSJ.com report today: "We have a supply issue," says Joanne Bradford, chief media revenue officer at MSN.

We all know what low supply and high demand means. Getting onto MSN's front page for twenty-four hours costs several hundred thousand to a million dollars. At press time, Kraft Foods had an interactive ad placed in the prime top right space on MSN.com.

At Yahoo and AOL, prices have jumped by double-digit percentages. Yahoo won't say how much they've increased, but AOL noted some ad units have gone up by 20 percent since January.

Great success for the portals, however, has resulted in frustration for marketers. Advertisers have to target some placements as far as 18 months in advance. The hottest categories are autos, travel, movies, consumer electronics, and personal finance, the report said.

To avoid those delays, advertisers have begun looking for more places to deliver their messages. While broadband adoption has made it feasible to deliver rich media ads to more people, they need a place to display first.

That has led to the rise in interest in focused niche sites. Though they have a smaller audience than a heavily trafficked portal, these niches can deliver an audience tailored to an advertiser that operates in that niche.

No discussion of online advertising would be complete without a mention of Google. Their model works differently than the other portals, and the minimalist Google home page does not display ads.

Through its AdSense and AdWords programs, Google displays advertising in its search results and across thousands of disparate web sites. They deliver ads on a contextual basis, and instead of upfront sales, Google operates on an auction-based system for keyword selection.

Google's latest 10-Q filing showed revenue of over $4.2 billion for the first nine months of 2005, and net income of over a billion dollars. While the portals make their ad dollars by the thousands at a time, Google picks up a little bit here and there and everywhere. And it's added up in a big way.

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About the Author:
David Utter is a staff writer for WebProNews covering technology and business. Email him here.

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