In the 90s the big thing was banners, in the early 00s it was search ads, but as Stacey Higginbotham asks, what will be the next big wave of online advertising? The massive popularity of social networking sites like MySpace and FaceBook has prompted some equally massive projections for ad revenue from these properties. The reality, though, hasn’t been so stellar. To take a case in point, despite MySpace’s continued ad-revenue growth, the clickthrough rates for the site’s ads have decreased since 2006 — suggesting increasing desensitization to ads on the part of users. Of the total revenue generated by Fox Interactive Media (the News Corp division that includes MySpace), 26% or $62 million is derived from a multi-year deal with Google that gave the search giant exclusive rights to placing search ads on MySpace pages. Google pays News Corp for this right, but for ads that don’t generate much revenue. Said Google CFO George Reyes of their social media advertising efforts, “We need to find ways to target people of particular demographics that are comparable to the people you might find in The New York Times or a particular publication that you may be familiar with.”

Social media disappointments notwithstanding, online ad revenue is still projected to increase sharply as more and more electronic devices such as mobile phones and TVs become web-connected. In the last decade, Internet technologies have revolutionized the stodgy $625 billion global advertising industry through advanced methods of targeting consumers and charging for results. For an in-depth look at how online advertising really makes money, check out this excerpt of a paper written by David Evans called “The Economics of Online Advertising”. It sheds some real light on what the “next big thing” might be –and more important, what it’s likely not to be.