Social media and mobile devices have changed how people interact with each other online. As a result, the economics of computer-enabled marketing has also changed. Investors should never concentrate their investments in any single web marketing stock when platform changes and shake-ups are to be expected. Instead, investors who want exposure to this sector should diversify horizontally across companies that buy traffic and that experiment with finding clients from different media sources.

Web 1.0

Two pillars of the Internet economy are advertisement revenues and lead generation. Website traffic has been monetized in one of two main ways: by selling viewer attention through advertisements such as banner ads, or by connecting them with vendors they might be interested in. Each connection is a “referral” or “lead.” Leads are value-added products. A viewer can click on a banner and fill out a form, a process that transforms an impression to a click action to a lead. Sales leads can also be generated from raw data harvested from the Internet, social media, or proprietary databases.

Web 2.0

Social media and mobile devices are now more commonly used to connect and search the web than personal computer-based search engine queries. The rise of Web 2.0 has fundamentally changed the economics of the web. In an article titled, “The next wave of digital growth is here“, Todd Harrison wrote for MarketWatch that web portal usage is down 24%, while social has grown 52%. These changes demonstrate how the economy of the Net is fundamentally changing. New developments in the “hypernet” threaten to disrupt media consumption through web search as much as the Internet disrupted television. These changes are substantial and promise to continue.  To continue reading, click here.