Michimich.com - On the 30th anniversary of the Netscape IPO the inventor of the banner ad warns: "Trouble ahead."

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Ken McCarthy, digital advertising pioneer

Author of the new book, "How the Web Won", cautions that AI is showing clear signs it's upsetting the fundamentals of the $790 billion digital advertising industry. Businesses that depend on the "blue link" economy need to radically rethink their media strategies.

NEW YORK - Michimich -- AI is having a huge, and largely unreported, negative impact on the "blue link" economy, which includes millions of companies that depend on digital advertising for their revenue, both on the buy and sell side, not the least of which are Google and Meta.

"The Internet economy has been prosperous for so long that many people have forgotten its roots," says Ken McCarthy, author of the new book, How the Web Won.

As late as November 1994, no one had a clue how the Internet was going to be successfully monetized. The answer came from the invention of the humble banner ad, which took place at a small conference McCarthy hosted in San Francisco in May of 1994. Thirty years later, in 2024, the global digital ad business was $790 billion, or 72.7% of the entire $1.09 trillion global ad market.

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Digital advertising still follows the simple guidelines McCarthy laid down at that historic meeting: (1) display the ad, (2) count how many people click on it, and (3) calculate the clickthrough rate. The first company to do this on a commercial scale was Hotwired.com, a division of Wired Magazine. Rick Boyce was the company's sales director.

Today, 1 in 5 Internet visits begins with a search, and it's not unusual for a major public company to derive 50% or more of its traffic from search results. AI has already reduced traditional searches by 10%.

Industries being particularly hit hard include travel and tourism (down 20%), e-commerce companies (down 9%), and news and media (down 17%). Individual companies reporting search referral declines include: Schwab (down 14%), TripAdvisor (down 34%), Starbucks (down 41%), and Netflix (down 23%).

"The Web is fundamentally a question-and-answer machine. In fact, Tim Berners-Lee, the co-inventor of the Web, modeled it after the popular Victorian era question-and-answer book, Enquire Within Upon Everything, which was in his family's home as a child. Users of AI are discovering they're getting better answers than they get from search, and search companies, like Google, are seeing their search revenue go into reverse," says McCarthy.

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What does the future hold? Part of the answer lies in McCarthy's book, How the Web Won. "Until we came up with the formula in 1994, no one had a clue how the Internet was going to monetize itself. How we came up with the answer is detailed in the book, and the same approach we used would work today."

HowtheWebWon.com