Study: Advertising is Barrier to Entry in Web Media

Online eyeballs are significantly more concentrated on the sites of a shrinking number of players, as advertising-related troubles knock out players and put up barriers to entry, according to a new study by Jupiter Media Metrix.

Indeed, the top companies controlling 60 percent of all minutes spent online decreased from 110 in March 1999 to 14 in March 2000 — a decline of 87 percent, according to Jupiter’s Media Metrix data unit.

The culprit? For one thing, shortcomings in advertising revenue. Considering the falling online ad spending, it’s no surprise that media players have fallen out of contention, while the biggest continue to capture market share (in terms of time spent online) as a result.

But it’s actually more complicated than that, according to Jupiter senior analyst Aram Sinnreich. While they’ve been thinning in number, the remaining online media companies have been busy boosting their own profiles. Efforts to improve presentation quality and brand identity — through years of self-promotion, marketing efforts, and integration with offline programming and promotions — are paying off for the remaining players.

As a result, the biggest hurdles for an aspiring Web media player are no longer site design and technical implementation — it’s brand equity, and your ability to promote yourself.

“Media companies competing for the attention of consumers must consider that while the key barrier to online entry and success used to be infrastructure, it has shifted dramatically to advertising and marketing,” Sinnreich said.

One particular way that the big players are hyping their offerings is through the oft-maligned house ad. While critics often complain that too many house ads dilute a site’s advertising effectiveness, Jupiter’s Sinnreich said the major online media players leverage them effectively to hoard eyeballs.

“The Internet may provide an opportunity for new players like Microsoft or Yahoo! to become serious media companies, but so far a major share of the market is being absorbed by a handful of companies, with those same companies continuing to direct traffic across their own networks of sites,” Sinnreich said.

Simple economies of scale are playing a role in industry consolidation as well. AOL Time Warner, for one, has turned integrated online-offline ad deals into a lucrative business — a revenue stream that isn’t an option for Web-only players.

With its cross-media deals, self-promotion, and a diverse spread of offerings — ranging from online versions of Time Inc. publications, to its 29 million-member flagship America Online service — it’s little wonder that the media behemoth leads in Media Metrix’ rankings, capturing a whopping 32 percent of online users’ time.

According to Media Metrix, Microsoft followed AOL with 7.5 percent of the total time spent online, with Yahoo! (7.2 percent) and Napster (which Media Metrix counts as a media player, with 3.6 percent) rounding out the majority (50.4 percent) of all time users spent using the Web.

A year ago, 11 sites controlled that same amount, Sinnreich said.

“Data show an irrefutable trend towards online media consolidation and indicate that the playing field is anything but even,” he added.

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