As I noted in my earlier post, there seems to be a
proliferation of companies reminiscent of the original dot com boom. Sue
Decker, former CFO of Yahoo, notes a few interesting aspects of the current
environment in a blog post and on CNBC back in April.
Time and cost to market is dramatically less than
the early internet days.
And yet it is taking longer for companies to turn
profitable.
As I noted, public companies love of non-GAAP
accounting to exclude the burden of stock based compensation blurs their
profitability for many investors and journalists. On the private side, it seems
that profitability is not an issue in the race to user scale, while there is an
excess of capital chasing growth and return, particularly since the great
recession.
Sue then notes that while the online ad pool has
certainly grown tremendously and is large, it is being dominated by a few of
the largest companies, and perhaps the remaining pool is overcrowded. That
certainly seems to be the case as Google, Facebook and Alibaba grow in huge
increments of dollars, while legacy giants like AOL and Yahoo or role players
like those in Ad Tech or Local reach their limits at relatively low levels.
I would agree that some shaking out is in order,
but it is now impossible to only consider digital pure plays. Media is online
now, Verizon buys AOL, ad blocking is on the rise, and consumers will continue
to evolve from the base of the everything I can consume ad supported
smorgasbord to perhaps a more selective ad supported and subscription combo.
The Pool is Getting Crowded! | Sue Decker | LinkedIn:
What’s so interesting about right now is that while the internet advertising
market is increasingly concentrated across a small number of players (the top 3
represent more than half the industry), the sheer number of new entrants hoping
to feed off that economic model is exploding.
CNBC: Online ad market disruption: Fmr. Yahoo president:
Online ad market disruption: Fmr. Yahoo president Sue Decker, former President
of Yahoo!, discusses the online advertising market
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