Fragmentation: Warning Shot or Opportunity?

You can spin the latest figures from Avenue A|Razorfish in two different directions. The agency billed $735 billion last year, of which 39% went to vertical sites, 31% to search, 19% to portals and 11% to ad networks. SVP of global sales Jeff Lanctot says they are seeing more spending move away from portals and into the longer tail. They estimate portal CPMs increased only 7% last year, compared to vertical site CPMs growing 20% to 30%. In one sense this sounds good for magazine media, many of whom serve verticals or, wisely, are starting to aggregate smaller sites and blogs around their specialty. The bad news may be the sheer speed of fragmentation, however. Last year, Avenue A spent across 863 sites, which mushroomed this year to 1,832 different sites. While overall spending was up 36% in 2006, that larger pie was cut into more than twice as many pieces. The challenge for branded media is not just to make their content more digitally friendly, but to recapture highly diffused spending. The second part of the equation may prove trickier and more costly than the first. The full Aveneu A| Razorfish outlook is available here and Jeff Lanctot’s blog is here.