Recession Hits Online Advertising: More Data

More evidence just came in that the recession has come to online advertising (in case you were still wondering). The Interactive Advertising Bureau (IAB) and PricewaterhouseCooper today reported their numbers for online advertising revenues in the U.S., and they are not pretty. Internet advertising declined 5 percent in the first quarter of 2009 to $5.5 billion, compared to the first quarter of 2008. Industry revenues were down an even steeper 9.8 percent sequentially from the fourth quarter’s $6.1 billion.

Last quarter’s falloff was first evident after Google (GOOG), Yahoo (YHOO), Microsoft (MSFT), and AOL (still part of TWX) announced their earnings numbers. As I noted in a month ago, the online ad revenues of those four stalwarts declined by 2 percent annually in the first quarter (7 percent sequentially) to $7.9 billion. But that is a worldwide number. Today’s IAB estimate adds further evidence that the U.S. is following the global trend.

Does one down quarter make a recession? The typical rule of thumb is two down quarters in a row, but that is for the economy as a whole, not for individual sectors. I guess we can wait to see what happens in the second quarter. The worst might very well be behind us. Or not. Either way, online advertising is hurting and seeing not just slowing growth, but actual dollar declines. Without a pickup in the general economy, online advertising will continue to sputter. Who thinks the second quarter will bring another decline? Who thinks it will show a rebound?

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Comments

[Best Intern...:]

We are seeing customers reallocating their "Yellow Pages" budgets to "Internet Marketing Campaigns." Also, I candidly did not examine the data you are referencing, but there is a strong trend among our customers toward organic search engine optimization as opposed to pay-per-click campaigns, which could be skewing the data. Not sure if the IAB/PWC reporting takes that into account?

Jun 05 06:02 PM

[CharlieZA:]

I vote for a second quarter rebound

Jun 06 05:19 AM

[Gabe Faraone:]

Companies that are investing in organic (natural) search optimization are better able to control their internet marketing budget WITHOUT extending their budgets. Google (Goog), Microsoft (MSFT), Yahoo (YHOO) and other search engines promote their pay-per-click (PPC) offering. PPC might provide quick results; however, unless you pay EVERY day, you lead flow with stop immediately. Search engine optimization aimed at improving organic (natural) placement is the only way to optimize your company's internet visibility that's not directly linked to how much you spend every day.

Jun 06 04:00 PM

[Ralph F:]

A friend forwarded me an email update from a luxury ad network called Halogen. Here's what they wrote:

"We have seen a substantial shift in the types of campaigns brands are running for premium CPMs. For branding, advertisers want big, bold, engaging solutions to include microsites, twitter campaigns, sponsored posts, custom content and large format ads. They are willing to pay >$20 CPMs for these. For direct response, they want the cheapest way to get their banners in front of their audience. Like we say in the office, 'the cookie has killed the CPM'. We are seeing more and more advertisers use behavioral targeting and re-targeting at <$2 CPMs to reach their target audience. Because of this, we are not seeing the quantity of run of network direct response campaigns we were seeing just 6 months ago.

Because of this phenomenon, you may notice lighter impression levels for June."

Jun 07 11:47 AM

[Hedged In:]

There's better data here:

What companies are saying about CPMs:
seekingalpha.com/searc...

What companies are saying about RPMs:
seekingalpha.com/searc...

Jun 07 11:50 AM

[Online_Adve...:]

Online advertising is receiving a lot of bad press lately about its effectiveness.

Marketing is not what generates a sale or closes the sale. Marketing in any business is to attract a potential customer.

It is the responsibility of the business to close and complete the sale with a potential customer. With the increased useage of digital marketing which is mostly PPC Text Ads, and the simplicity of implementing text ads, everyone is using the do-it-yourself approach. The challenge here is everyone is now attempting to be an ad-copy writer.

While it may not be difficult to write a PPC Text Ad or create a nice looking banner, when the ad is displayed it is the 1st opportunity of contact. If this is not done well, the results will really show in the number of clicks. Among other factors is the 2nd point of contact when the visitor arrives to the website.

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Jun 11 09:31 PM