Pith of the pith:
Once advertisers realise that ROI from online advertising is low and subprime, they might withdraw from advertising on this medium at all. Then, the survival of internet will be at stake.
The pith:
The web is based on an economic model similar to TV advertisement model of second half of the last century. The content on the web is free while advertisers are charged for allocating space on the internet real estate.
However, this model of online advertising is not that sustainable as it is supposed to be. Google, which just won the legal suit filed by Viacom against YouTube regarding illegally broadcasting copyright content, spent 8 years to break even the business from YouTube after its $1.6 billion acquisition.
Marketing spend on online advertising is increasing. In 2014, all American advertising companies spent $180 billion on paid media out of which 28% was online spend and 10.6% on mobile. The rate of growth of online advertising expenditure has increased by over 17% since 2013. Google makes 95% of its $66 billion revenues from ads.
However, the click based online banners are not liked by all users. Tools of ad-blocking and non-genuine click-throughs have made internet advertising spend suboptimal. Only 1 out of 1000 users click on an add. Around 72% of ads are inappropriately placed w.r.t. content.
