AOL: Advertising revenues continue to plummet
In April, AOL Time Warner told investors (subscription required) that $1.8 billion was the "floor" for AOL's advertising and commerce revenues could go this year. But now AOL is warning that the floor may come in as low as $1.6 billion or approximately 10% lower than the previous forecast.
At the peak of the boom, the average online ad cost about $6 per thousand viewers. Some Internet-related companies wanted so badly to get on AOL that they gave up chunks of equity in their companies to pay for the ads.
Now, average online ads hover between $1 and $3 per thousand viewers, and Web sites are going to extremes to survive. Many are running ads free and only getting paid when customers click on the ads. Other sites are running what appear to be news articles written by advertisers. And one Web site, Forbes.com, has even promised advertisers a money-back guarantee if their ads don't work at generating "brand awareness," as measured by surveys and other follow-up.
Forbes.com President and Chief Executive Jim Spanfeller said he decided to offer the money-back guarantee out of a "desperation to put the proper perspective on Web advertising."
The desperation appears to be working. The Online Publishers Association said it surveyed 14 of its members, including Forbes.com, Slate.com, USAToday.com and the Wall Street Journal Online, and found their collective ad sales were up 33.5% this year over last year. "I think there's been a flight to quality," says Michael Zimbalist, executive director of the association.
But it may be more of a flight to bargains. The kind of deal Nutri/System made with America Online -- known as pay for performance -- is in increasingly popular in Internet-ad industry. GartnerG2 Analyst Denise Garcia estimates 30% of online-ads are pay for performance -- a sign, she says, that media companies have a glut of inventory.