As Ad Revenues Surge, Who Comes Out on Top?

During the Great Recession of the last two years, online advertising revenues dipped as much as 7%. Over the next five years, sales of online advertising are expected to more than double, led by healthy gains in search engine advertising. By the end up 2010, revenues are projected to reach nearly $19 billion, up almost $10 billion from 2004. Revenues from sponsored links and other forms of search engine advertising are expected to increase at a rate of 12% a year, whereas display ads should rise by an annual rate of 7%.

So as the online advertising market turns around, which companies are likely to capitalize on the success? Google’s heavy reliance on sponsored link and search engine advertising revenues positions them to continue to thrive in the rebound, but Yahoo!’s future is not as clear. With one year at the helm under her belt, Yahoo! CEO Carol Bartz has certainly made her mark on the company. If nothing more, she has injected intensity, energy, and a desire to return to the company’s core businesses. Employees have had mixed reactions to her management style, and it is still premature to assess the results of her tenure. Her propensity for loose-lipped conversations with the media laced with profanity and bravado have made Bartz a “love her or hate her” figure in the tech world. A benefit of these candid interactions is that the public generally has a crystal clear picture of what’s going on at Yahoo! – good or bad. In recent interviews, she noted that her company plans to focus on premium, interactive, and bold display advertising.

The pitch to advertisers is this: why spend money on a dull and unassuming text ad on a search engine or in print media when you can dazzle tens of millions viewers with a colorful, animated, and assertive display ad? When it comes to these display ads, Bartz indicated that Yahoo! is trending towards bigger and flashier. Check out this TurboTax ad on the Yahoo! homepage:

The still image of the ad is dominating enough; it takes up nearly the entire homepage screen. However, when you see the ad in action, it takes on a life of its own. In this Super Bowl and Tax Season TurboTax spot, Chris Berman’s booming voice commands attention and flashing gadgets and animations draw the viewer’s eyes to the massive ad. Beyond the size and energy, the value lies within the ad’s interactive capabilities. This “on demand” functionality hands the control and power back to the user, capturing their interest and maintaining their engagement.

We’ll likely continue to see similar ads on the Yahoo! homepage for the foreseeable future, and soon enough we will be able to gauge their effectiveness as the Great Recession becomes a painful memory – but a memory nonetheless. Carol Bartz is hedging Yahoo!’s bets on display advertising and premium content, but will the surge of search engine advertising revenues halt her efforts?

What do you think of the large display ads? Are they too obtrusive or do they better suit your online needs?