Wall Street Journal reports reversal of fortune among on-line publishers

The relationship between advertisers and online publishers is undergoing a seismic reversal in leverage, according to a Sept. 10 article in The Wall Street Journal, especially among the industry’s giants. The late ’90s was a boom time as eager young companies flush with cash poured money into high-priced banner ads on sites owned by on-line industry leaders. In its heyday, the average on-line ad cost about $6 per thousand viewers. Some Internet-related companies wanted so badly to get on sites like AOL that they gave up chunks of equity in their companies to pay for ads. Now, The Wall Street Journal reports, average online ads hover between $1 and $3 per thousand viewers and web sites are going to extremes to survive. To rebuild relationships with past advertisers, on-line companies are running free ads and receiving compensation only when customers click on the ads or buy the product. AOL Time Warner, which has seen its advertising and commerce revenue drop from $2.7 billion in 2001 to an expected low of $1.6 billion this year, has been following this model. The upshot, though, is smaller sites that were hard hit two years ago are recovering, while the giants scramble and offer bargain-basement prices.