As Online Ad Revenue Remains Concentrated In Few Hands, Frustration Builds

With online ad spending growing more slowly, are internet ad dollars being spread too thin? Reuters put the question to a few media execs and digital agency heads who express concern about the heavy reliance on advertising as a means of support.

Beth Comstock, president of Integrated Media at NBC Universal, is pretty emphatic about it. Noting that NBCU started a fund to invest in digital ventures, Reuters (NSDQ: RTRSY) recorded her frustration at the seeming lack of imagination of some business models that are presented to her: “I’m getting to the point where I feel like every answer to every business development pitch is ‘We’re going to be advertiser supported.’ … There are not going to be enough advertising dollars in the marketplace. No matter how clever we are, no matter what the format is.”

Aside from the proliferation of new web outlets from traditional media companies, others like Google (NSDQ: GOOG) are drawing more and more ad dollars. Still, the portion devoted to online advertising remains demonstrably small compared to what TV alone receives. And in its recent forecast, ZenithOptimedia predicted that the internet’s share of the $495 billion in global advertising would still be under 10 percent in 2009 – still behind what’s spent on magazines, newspapers and TV. So there’s still room for online advertising to grow, which the Interactive Advertising Bureau – and others – has suggested will happen once there are better metrics in place.

So the big problem is not that ad spending is drying up, it’s that the bulk is concentrated in a few sites. Citing the IAB, Reuters points out that the top 50 websites in the U.S. took in more than 90 percent of the revenue from online ads in H107, while the top 10 sites sucked up 70 percent of internet revs for the same period.