Recession Hits Online Advertising: More Data

by: Erick Schonfeld

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 (NASDAQ:GOOG), Yahoo (YHOO), Microsoft (NASDAQ: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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