Is the display advertising model broken?

Selling banner ads on websites is a cut-throat business where supply is outstripping demand and prices are falling through the floor. Unfortunately, it's a situation that is only going to get worse.

Microsoft shelled out a record $US6.3 billion for aQuantive in 2007 at the height of a race with Google Inc and Yahoo to clinch the top spot in internet display advertising, betting on what many thought was a red-hot business. However, the write down of almost all of that deal's value, announced last week, shows how misguided those expectations were, and how brutal the once-thriving business of selling banner ads on websites has become.

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