Saturday, June 6, 2009

Online Advertising Dips 5% for First Time

Some people seem to be shocked that online advertising, which has been growing for seven straight years, dipped about five percent in the first quarter. It wouldn't be the first time people have argued, or seemed to believe, that something related to the Internet can transcend the operation of markets.

At the turn of the century, new "Internet" business models were touted that seemingly defied the normal business rule that one must have revenue to be sustainable. Others argued that valuations of Internet companies were different from valuations of companies based in the physical world. 

Anybody who argued to the contrary was ignored with a direct or indirect "you don't get it" attitude. That belief was proved devastatingly wrong.

Online advertising is advertising. Advertising is a cost of doing business. Companies are being careful about the costs of doing business. So it is no surprise there is a bit of a dip. The Internet is part of human life. It is not immune from things that happen in the broader spheres of life. 

Nor is the delusion especially new. After 1917, the Soviet Union believed it could wall itself off from the global economy. After World War II it maintained the fiction of two global economies, one capitalist, one socialist. The Soviet Union was wrong. 

The Internet changes lots of things. It doesn't repeal or escape economic laws or human behavior.

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