Online Ad Dollars: Supply May Never Catch Up With Demand

A lot of numbers are being thrown around today in the world of technology. Big numbers. Investors are tossing cash on countless startups, large companies are buying up smaller ones at a daily rate. A whole lot of capital is at play, for sure.

But is this growth we’re seeing on the Web sustainable? Is this great big boom we’re currently experiencing going to be something ever greater numbers of people will continue to enjoy for a great many years to come? Or will we see things get cyclical, with a periodic refresh taking place to cool the silicon industry, where everyone more or less gets to take a brief breather and sort out the good, resilient apples from the bad?

Honestly, I’m not sure. Things could go either way, really. If industry vets and newbs alike don’t keep in mind the lessons learned in the ’99-01 timeframe (as well as points deemed important by even earlier busts in a number of other industries), there’s a good chance that in a few years a heck of a lot of people will be running for the exits with pockets as full of cash as possible. On the other hand, there’s reason to think that the guys and gals running things at the various startups and established entities around the tech world exercise more, well, reason than was the case ten years ago. But there’s an issue that Reuters, of all publications, recently brought to my attention in a story concerning online advertising - an issue that might be prove something of a rain cloud over this global party currently underway. The issue concerns the elemental economic theory of supply and demand.

Yes, Reuters several days ago published a piece on topic of online advertising, and whether or not there are now too many “hands” making attempts to feed of a realistically finite supply of cash. Cash reserve for advertisements, that is.

We all know the ad industry on the Web is growth. Very quickly, in fact. Analysts expect to find $31billion spent this year on advertisements involving everything from personal hygiene products to home loans, all “supporting countless news sites, social networks, video exchanges, and blogs.”

$31 billion is a lot. And it’s not enough. Everyday, more players are getting into the game. Those players demand financing to sustain operations - most all of them relying on ad dollars to do so. Therefore it’s only logical to assume that for many will be shorted due to a lack of said dollars. And it’s not likely that advertisers themselves will “catch up” and give every website and service what they want. They have their own interests to look after, and helping outside entities to flourish at their expense isn’t a role they wish to or will ever sign onto. Thus, will we see Web businesses hit the proverbial glass ceiling, finding they indeed have limited growth trajectories?

I dare say that may be true for a great many companies, small and medium-sized. While the advertising market on the Web is likely to grow in size and in value over the years, there’s certainly needs to be a balance of 1) offering existing partners – whether it be The New York Times or Profy – the chance to strengthen their already established relations, and 2) providing budding enterprises the option to start on reasonably steady footing with an eventual chance at growth.

Alright, a good deal of what’s been said above may seem highly analytical, speculative, and may appear to have some traces of pure gibberish to boot, but the picture painted is really a rather simple one. Web entities clearly do rely on advertising for the vast bulk of their revenue. Some surely live on service fees and whatnot, but advertising no doubt plays a large part in sustaining countless businesses. Don’t think so? I’ve two words for you: Adsense and Adwords. And that duo is just a wee part of a very grand puzzle. With some perspective, it’s easy to see this direct corollary between advertising and most everything going on on the Web today.

So the big, whopping multi-billion-dollar question is this: Can we expect to continue to see things keep on keeping on, witnessing seemingly almost unhindered growth? Or will we soon find a whole heck of a lot of businesses starving for ad-based cash sooner than advertisers catch up to the phenomenal growth of the Web being charted at present?

Personally, I fear the former scenario will come to be a scourge that hits online entities sooner than the necessary ad “rations” get delivered to their respective accounts.