Too few ads to go around

The launch of web 2.0 sites such as YouTube and MySpace have all relied on massive amounts of funds through advertising, but new reports suggest such dependence is a thing of the past.

Experts now say there simply aren’t enough ads to go around.

Former CEO of Fox Interactive and partner in Velocity Interactive Partners, Ross Levinsohn, is skeptical of the future. He tells “My concern is the really great concepts that are features, not companies. There isn’t enough advertising to support all those features, and in compression times, advertisers tend to flock to safe names and sites that have real traction.”

While online advertising has grown more than 20% a year from 2003, experts predict the flow of advertising to start-ups will now come to an end. While online advertising will certainly be present, it is likely companies will be less willing to invest in social media and new sites such as Twitter and YouTube.

Warren Lee from Canaan Partners says: “The last three years have been boom times. My guess is there will be a 5% to 6% increase next year in an overall flat advertising market.” Digital media buyer at Mindshare Interaction, Andy Chapman, suggests, “when you have a contraction like this, people stay with the best brands”.

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