A few months ago, a number of major brands said they’d be making significant investments in advertising to help drive revenue.
Now, the companies that are currently making money from their products say they’ll have to do the same thing if they want to remain viable.
“We don’t have the same sort of revenue stream that we had before,” said Tom O’Donnell, chief executive of the advertising giant Adweek, who has previously been a vocal critic of ad technology.
“I think the market will be really hard-pressed to see this kind of growth.”
Advertising companies are also in a state of flux, with some seeing a surge in demand from the millennial generation as advertisers see a need for more targeted advertising, while others are seeing a decline.
For brands like Netflix and Spotify, which are known for their online video services, the changes will likely have an impact on their bottom lines.
“It’s going to be a very tough year,” said Matt McIlwain, an analyst at Forrester Research.
“There’s not a lot of upside here.”
But if advertisers are going to survive, it won’t be with more targeted ads, it will be with better ways to drive traffic to their websites.
For example, the ad networks have been experimenting with video ads that can be embedded into their own videos, which has been seen as a way to increase the reach of their online services.
“The way I look at it, that’s going be one of the big drivers for revenue growth,” said O’Connell.
“A lot of the other revenue streams are not going to go as high as they might have in the past.”
Adweek and other industry analysts predict that if there’s a surge of interest from the Millennial generation in the advertising space, it could be the tipping point for more companies to move in that direction.
It’s a big change for the advertising industry, and one that could mean a bumpy ride for companies like Netflix.
For years, Netflix has relied heavily on its traditional streaming video service to grow its subscriber base.
But last year, it saw the number of subscribers increase by more than 60% from 1.5 million to 2.6 million, and that number will likely rise even more this year.
Netflix CEO Reed Hastings said the company is “deeply committed” to continuing to grow the company’s audience and that the new video service will give the company a “much more robust platform to monetize on.”
“It is a new business model for us, so it will take some time to establish and test the business model,” Hastings told investors last year.
“But it’s something we’re going to do.”