Survey: More online ads, free content

December 26, 2007, 7:25 PM UTC

By Yi-Wyn Yen

A new study reveals that the majority of consumers would rather be bombarded with online ads than pay for content on the Web. Deloitte’s annual media consumption report also indicates that 66% of Internet users would click on more online ads if they were better targeted to them. The study used 2,081 U.S. Internet users ranging in age from 13-75.

“This is across the board, what mainstream America thinks about online advertising,” says Ed Moran, director of product innovation with Deloitte who conducted the survey.

In the online world where anything legal is rarely paid for, younger users are most receptive to ads. Nearly three quarters of Generation X (ages 25-41) and millennials (ages 13-24) polled said they would be willing to be exposed to online ads in exchange for free content. Among the millennials, who visit fewest sites per week of any generation, 72% said they’d click on more ads if they were more relevant, while 67% of Xers said they would.

Major Internet companies have been banking on this strong consumer attitude towards online ads. Everyone’s racing to grab a share of the projected $27.5 billion that will be spent on online ads in 2008, according to research firm eMarketer. Google (GOOG), Microsoft (MSFT), and Yahoo (YHOO), spent more than $11 billion in acquisitions to reshape Internet advertising this year in hopes of delivering more relevant ads.

Online ads range in effectiveness. Ads delivered from search engines remain the most influential. The study reports 78% respondents found the most useful ads by performing keyword searches. (This may also explain why Google’s paid search business is expected to increase nearly 42% to $16.6 billion next year.)

Ads inserted into videos are among the most hyped by big media companies, but they appear to be the least effective among users. Less than a third want to watch commercials that appear before the start of a clip and only 17% said they will watch an ad that plays during a video. Hulu, a joint venture between NBC Universal and News Corp. (NWS), is currently testing the ad model in shows like “Heroes” and “30 Rock”, which it streams on the web.

“We’re at the cusp where we’re seeing people consume media a la carte and on any device. It’s not just TV anymore. Companies are experimenting by moving their content to the web and tacking on the commercials. It’s a logical way of extending the model that works on one medium, but willthis work going forward?” Moran says. “Right now there’s no deliberate advertising model. This is a hard model to predict.”