As a result, this high demand from both users and advertisers or marketers will cause higher spending rates on e-mail advertising and in the same time will urge more companies to enter the game. Figure (2): Top 10 Ad-Revenue Generating Sites by Genre (millions) November 2007 Source: Nilson Online, AdRelevance (November 2007) (cited in Marketingcharts. com, (2008c)) It is clear that providing a free email service is considered as a step on the way of revenue expansion through paid advertisements.
However, this free service could also have hidden or indirect benefits such as maximizing customer loyalty and enlarging the knowledge base about customers. According to emarketer (2008b), “US online advertising revenues reached $21. 2 billion in 2007 with 26% increase from 2006”. This dramatic increase will naturally result in more future spending on online advertising especially after we saw the positive relationship –as shown in figure 1- between online population and online advertising revenues.
The need to discuss the online advertising market is to understand one of the reasons behind the competition in providing free web-based e-mail services. E-mail advertising revenues “represent 2% ($424 millions) of US online ads revenues in 2007 and is predicted to increase by 81% in 2012” (emarketer, 2008b) the 2% percentage may seem insignificant, until we add the future growth in email advertising revenues (according to the same source, the growth rate of US online advertising revenues from 1997 to 2007 is 2230%).
Especially, when we know that “revenues from online advertising in 2007 ($21. 2 billions) not only exceeded Radio advertising ($19. 8 billions) and Cable television advertising ($20. 9 billions) in total U. S. ad spending but also with a higher growth rate. ” (IAB, 2008, p. 13) This section will analyze the current situation of search advertising market, mobile advertising market, instant messaging market, social networks and portals markets. Till this moment, search advertising has the biggest share of online advertising revenues. According to emarketer (2008b), “search engines advertising revenues represent 41% of total online advertising revenues in 2007”.
Mobile advertising is another market, which could represent a real challenge for advertising services providers and in the same time an opportunity for those providers. According to emarketer (2008), “US mobile advertising spending in 2007 reached $878 millions and is about to reach 6,525 millions in 2012” (cited in Marketingcharts. com, 2008d) A closer analysis for search advertising revenues predictions by emarketer (b 2008) shows that “the growth rate of search advertising revenues from 2007 to 2012 is predicted to be 125. 3%” (emarketer, 2008), while “growth rate for mobile advertising spending from 2007 to 2012 is predicted to be 536. 2%” (cited in Marketingcharts. com, 2008d).
The Radicati Group, Inc. (2007) predicted that “instant messaging revenues will grow from $203 million in 2007 to $530 million by 2011” with 161% growth rate. Another development is the social networking websites that hit higher traffic and “made advertisers and marketers think about taking advantage of this ‘communication vehicle’ to use it as a ‘promotional vehicle’” (Hitwise, 2008, p. 8)
Naturally, changes like these could turn the situation upside down in few years, that’s why companies -who has a market share in one of these markets- have to fight for keeping this share and continuously try to expand their revenues by providing more services that attract more users to their websites. A simple fact could make this clearer, according to emarketer (2008c), “in 2005, total US online advertising revenue growth rate for the top four portals (Google, MSN, Yahoo! And AOL) was 46. 7% while it is estimated to be only 21. 7% in 2008”.