NEW YORK Portals rose to prominence based on the theory they were one-stop shops for users and advertisers. But as the Internet has matured, users have increasingly spent time on social networks and niche sites. Now advertisers are following their lead.
Avenue A/Razorfish, the digital agency owned by Microsoft, detailed this shift in its annual look at ad spending trends. Of the $735 million it spent on digital media, 19 percent went to portals, down from 24 percent in 2006. The agency spent more on portals -- a 7 percent increase -- but that was far below the 36 percent overall growth rate for Avenue A/Razorfish's spending.
Where did the portal money go? To search and specialized sites: Spending on vertical sites rose 42 percent, while search buys increased 50 percent.
As it seeks customers in more places, Avenue A/Razorfish bought ad units from 1,832 properties, more than double the amount it worked with the prior year.
Clients and agencies are simply catching up to consumer habits, said Jeff Lanctot, Avenue A/Razorfish svp.
While people may have spent a lion's share of their time online at a few properties, they have been shifting that to new areas. New properties on Avenue A/Razorfish's radar in 2007 included teen social net Habbo, fashion site StyleHive and food destination Cooksrecipes.
"Advertisers are looking more broadly and finding consumers in more places," said Lanctot.
Pricing is another reason that portals are losing clout with ad buyers. The CPMs Avenue A/Razorfish paid overall were up 20 percent, but portals could only increase rates 7 percent while verticals rose 30 percent. Lanctot cautioned that this was more a result of vertical properties becoming more sophisticated in their sales and catching up with portal sales forces.
The agency still increased its spending on portals, although at a much slower pace than vertical sites and search. Within verticals, social networking sites saw the biggest increase, with spending growing 58 percent to $55 million for what Avenue A/Razorfish calls community properties.
Lanctot expects these trends to continue. In seeking to balance efficiency with targeted reach, advertisers will turn to niche ad networks, he said. Media properties like Martha Stewart Living Omnimedia and Forbes are setting up focused networks. Lanctot said their moves could pay off handsomely by helping agencies reaggregate fractured audiences while not sacrificing targeted environments.
"Advertisers are going to look for filters that say what's good and what to trust and not to trust," he said.
Avenue A/Razorfish increased its spending 34 percent on ad networks, but most of the increase went to a handful of large-scale networks. The top five ad networks saw spending increase 53 percent, while the rest only got just 4 percent more spending. Like in search, size matters in ad networks, Lanctot points out, because the larger the network, the more consumers its cookies reach, the more data it collects and the more ad offers it can target.
