Friday, May 25, 2007

Look to Norway! Or not.... By Even Aas-Eng

My very good friend and COO of Compraventa in Spain (Spains largest classified site) Pablo Martin commented on my earlier post about the ad potential in youtube. He said that CPM prices in Norway have gone totally haywire and that in all other markets the average price per CPM is substantially lower. And he is right indeed.

I suggest that the rest of the online media world should follow the Norwegian online market closely in the times ahead. Why? The last three/four years we have experienced a massive growth in the spending on online media. The growth has mostly been driven by spending on display ads on the big online newspapers and portals. Unlike other markets we have spend little money on SEM/SEO og affiliate marketing (to my despair)
Spending on search is still a mere 10-14% of the total. In some areas Norway is a very sophisticated market in others we are completely lost. Even though this is an interesting discussion in itself lets not focus on that now.

So we spend money on display ads in Norway and we spend a lot. Who are the advertiser, mostly distribution players like the travel industry and other e-commerce companies. They have spent more and more money on the same ads every year as the prices have increased. The total number of user has also risen but not enough to defend the steep rise in prices. The result for the advertiser has been a weaker ROI year by year. But they still spend because they are still in positive territory.

Now it looks like we are getting closer to a tipping point. Prices and the CAC are getting so high that advertisers are starting to think twice about spending their budgets online. There is still growth but I think we might see a halt very soon. So what happens then?

We might experience a drop in media prices or at least a flattening. The other scenario is continuous growth. How can that happen? The keyword is brand advertising. When/If the big brand advertiser starts throwing more money online they might replace the distribution companies as the number one source of income. Brand advertiser has more money, they are willing to spend more money and they don’t measure ROI the same way. This “shift” in advertisers could lead to further revenue growth for online media companies. What will the distribution players do? They will spend more with google, yahoo, tradedoubler, and others.

This is why I think that other countries should look to Norway, they might learn something about the future of their business. Or not!