Google and the changing facets of Online advertising

The Times Bits blog has some interesting nuggets of info about Google

1. In a regulatory filing with the Securities and Exchange Commission, Google said it had 1 million advertisers as of 2007.
2. Ben Schachter, an analyst with UBS, said he expects the current number is likely to be between 1.3 million and 1.5 million.
3. Each advertiser, on average, spent a little more than $16,000 a year on Google. That figure changed little between 2003 and 2007.

Google's success mantra has been based upon the fact that they allowed auction to work as a price discovery element for their ads instead of setting a fixed price themselves.Google has tapped into the longtail both of advertisers and publishers for Google more advertisers means more revenue — and more revenue, on average, for every search query — for a couple of reasons:

1. larger number of queries will have ads matched against them;
2. On popular queries, competition for placement will be more intense, and as a result, ad prices, which are set by auction, will be higher.

Today number of publishers on the web has gone up significantly and Google also has encouraged publishing tools like Blogger which has increased the available inventory but this seems to be changing the current facets of online advertising.Now with increasing number of ad exchanges we are in a world where millions of advertisers can buy billions of impressions at penny CPMs or even better dollar CPAs (if you are skillful enough). As Fred Wilson puts it the model for online advertising is changing display advertising will get so cheap and the tools to target it will get so good that it will be shown that it can outperform search

This is a scale business with scale economics.This is not good news for publishers who have an economic model based on a $20cpm likes of Yahoo an AOL. It is very good news for social media properties that have low costs and a high number of available impressions to sell. It's even better news for people looking to sell stuff on the internet.

This recession has made things hard for everyone with numerous content based publishers feeling the brunt and probably as things show probably this recession will force the web based publishers to rework their business models from advertising to affiliates or maybe something else altogether.