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Yahoo!!, Google erode ad dollars from traditional media houses

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MUMBAI: The 10 largest information companies seem to be feeling the some heavy duty revenue heat. Here's how... According to a report put out by research and advisory firm 'Outsell', the astounding revenue growth registered by both search engine majors Google and Yahoo!! is coming at the expense of the 10 largest information companies in what is a $263 billion industry.

 

The poignant question here is with the explosion of spending on search engine advertising continues to alter the marketing scape; have there been any ramifications for traditional information entities?

Without doubt, search advertising has taken off in a big way which has in turn seen traditional informative publications normal advertising revenues dip as funds have been diverted to Google and Yahoo!. A widely used quote from Outsell's report gives a fair idea of the search engine advertising affect in a rather candid manner: "they're [Google and Yahoo!] literally sucking the financial air out of the room."

The ten information companies that have been referred to are - Daily Mail & General Trust, Gannett, McGraw-Hill, Pearson, Reed Elsevier, Reuters, Thompson, Tribune, VNU, and Wolters Kluwer.

Apparently, money that has originally been set aside for traditionally advertising with these companies has been diverted to be used for search advertising. Outsell reports that the 10-member group generated a combined revenue of $60 billion in 2004, which is $4 billion more than the previous year. Google and Yahoo! alone generated $6.5 billion in 2004, which also indicates a year-over-year increase of $4 billion.

The extraordinary growth of Google and Yahoo! has been attributed to the marketing and advertising spending that would have gone to the other 10 companies, particularly newspapers and B2B trade magazine. The reason partially for the shift is due to the fact that marketers are paying too much for print ads or too little for online ones, according to Outsell.

This puts the traditional media companies into a tough mode in terms of garnering ad dollars. Many newspapers get more than half their revenues from classified, which are really susceptible to the type of ads that Google and Yahoo! are offering.

Also, another important point in note being the ROI efficiency that are generated by search related advertising which draw more advertising dollars, reducing the overall amount that is allocated towards traditional ad methods like yellow page listings and print ads.

 

 

This new trend may not essentially spell doom for traditional media outlets. Although, what it does point out is that search engine marketing has gone mainstream. Another possibility that might emerge is that marketers might demand a more cost effective pricing from traditional media houses as they have already experienced marketers that have experienced the low cost per click (CPC) with search advertising.

Nevertheless, with businesses discovering how lucrative search engine marketing programs can be, traditional outlets have already started looking for ways to get back in the game.

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