This story was written by Keith Dawson for UBM DeusM’s community Web site Business Agility, sponsored by IBM. It is archived here for informational purposes only because the Business Agility site is no more. This material is Copyright 2012 by UBM DeusM.

Agility on Display in Online Advertising

The online ad business is growing fast and its moving parts are constantly shifting.

In the hothouse business of online advertising, everyone is demonstrating all the agility they can muster in order to carve out a bigger slice of the growing pie.

Of the $141.5 billion spent on advertising in the US in 2012, online ads will account for 27.9 percent, and will exceed print advertising (newspapers and magazines) for the first time this year. Television advertising gets the lion's share of ad dollars: 48 percent this year but dropping to 43 percent by 2016 as online takes a larger share.

Online ads break down into two main categories: search and display. There are a number of smaller categories, some of which, confusingly, are sometimes lumped in with the two main ones.

Search ads will be a $17 billion business in 2012. These are the small, mostly textual, ads that appear on the same page as search results. Google rules the roost in search advertising, consistently taking 66 percent of this category, leaving Bing and Yahoo struggling with under 15 percent each. Facebook does not do search advertising. Click-through rates for search ads are the highest for any type of online ad.

Display ads are the larger, often graphical ads that appear on most news pages and across the Web via Google's DoubleClick Ad Exchange and other like services. Spending on display ads will be about $15 billion in 2012. Facebook is dominant here, with something over 30 percent of display ads in 2012, but Google is gaining market share as well, mostly at the expense of Yahoo, Microsoft, and AOL. These latter three companies formed an alliance last year in order to sell each other's ad inventories, an admission of the ascendency of Facebook and Google in the display category.

Other advertising categories include Web video (frequently lumped in with display), mobile, and social -- Twitter and that small part of Facebook's ad business that is not display, such as Sponsored Stories.

Everyone in the online ad business wants to take a bigger chuck of the fat budgets that advertisers still lavish on tried-and-true TV advertising. Online video distributors have been active in this battle of late, joining together to put on highly produced and star-studded events in New York to woo advertisers over to a greater reliance on Web video ads. This ad category is projected to rise from under 8 percent of online ad spending this year to around 15 percent by 2016.

AOL, Yahoo, Microsoft, Hulu, and YouTube are collectively showing a lot of agility by participating with cable networks in a series of events called Digital Content NewFronts in New York. "Each is showcasing professional-grade content with high production values and big-name celebrities in events that occurred alongside similar presentations from cable networks," the LA Times reports. (Apparently Yahoo's showing was especially glitzy, and Microsoft's much less so -- instead of hiring a hall, Microsoft invited advertisers to their Manhattan office, and their celebrities were of the "Who?" variety.) The underlying message, according to the LA Times, is: "America's advertising community should stop associating Internet video with talking oranges and skateboarding dogs and instead think of it as on par with TV."

In the weeks leading up to its IPO, Facebook is enduring a growing chorus of discontent from its advertisers, the Wall Street Journal reports. The complaints are of two kinds: from advertisers that want to spend more money with Facebook but can't find anyone to take their checks, and from another set of advertisers that are unhappy with the dearth of hard metrics provided by the Facebook platform. The WSJ quotes a marketer at Kia Motors: "The question with Facebook and many of the social media sites is, 'What are we getting for our dollars?'"

Facebook's lack of agility vis-a-vis advertisers has a good reason behind it: Mark Zuckerberg's attention is solidly on the user's experience. The company has moved in the last year to gear up more attention for the companies that actually pay the bills, but progress has been slow, the WSJ reports. Doubts about the viability and growth rate of Facebook's advertising business could have an impact on its IPO valuation.

Online advertising is a vibrant sector, and plenty of agility is on display from companies of all sizes in the business as they work to make their industry a worthy successor to the long-ruling boob tube.