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, Yahoo, Microsoft, and AOL 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?
Erick,
Do you need to have a subscription to get data like this? I’m looking for a good way to find data on websites such as user growth, time on site, traffic patterns, etc. What do you recommend?
Quantcast has some, but not all of this. Especially not on the user growth side.
We can see optimism in poll results. But as for US it will be decline, while international revenue will be up.
yes!!!!!!!!!!! HAHAHAHHAHH
http://code.google.com/events/io/sessions/BuildingBusinessSocialApps.html
Bookmark this page, and check out the video once Google posts it. Not sure when they will, but some big names in Social media were at that session “Building a Business with Social Apps”
They explained that social networks, apps and media make a tiny fraction of their money with advertising. A very tiny fraction. Most of their money comes from direct sales.
Advertising on the internet is a very small portion of the total revenue. It is probably the smallest portion for social media.
Virtual currencies and online micropayments are where millions are made. Virtual gold yields real cash. To truly make money online in 2009 in this economy we have to forget about advertising, and build something users are willing to go over to paypal and click “send payment” for.
We have to create online items that are as addictive as cigarettes. Whether that’s CDN, hosting, MMORPG gold, or what ever. We have to create the illusion that these things have monetary value and we have to do that fast if companies are to grow right now.
Advertising was a cash cow of 5 years ago. Firefox plugins like Ad blocker plus have pretty much reduced CPC to a point where we can no longer expect that to be viable in the coming years. Mobile ad blocker plus is coming as well.
I don’t know when Google will put that video up, so I would bookmark it and check back in a week or so. It was very informative to say the least.
Internet CPM and CPC based advertising is fast becoming a falling knife.
… and the flip-side… vertical networks growing incredibly fast: http://www.clickz.com/3633578
I think in the future it will be more and more dual: really tactical CPA based marketing or big executions (dominances, roadblocks) that engage the user. There is no path in the middle.
In recent years the major spenders on web adverting were the automotive and financial industries.
It’s safe to bet that they all took a major cut in their ad spending.
Interesting question though is how much they cut in online and how much in offline?
This will help to understand the health and future of online advertising.
Also, will be interesting to check whether publishers who didn’t have access to these advertisers were also seeing such a drop in revenues or not.
I actually keep hearing on publishers who had their best quarter ever, with advertising dollars actually going up…
Yes, I’d be interested in other areas as well. Is the mobile space contracting? While small, are people putting money in? How is publishing? Magazines aren’t in good shape in general…
There is money to be made, but I bet that this isn’t simply a contraction on the economy. The dollars are going to have to spread. Where is the question.
More interesting than the article is the poll data. Running close to 50/50 whether the worst is behind…
@Mike – You can get the metrics you’re after from comScore. email me at gmudd[at]comscore.com if you’re interested.
I think it’s too close to call. The other thing to take into consideration is that advertisers are wising up to what they can get social networking and blogger folks to do for free (which in turn, produces better results than an advertising expenditure.)
So I don’t know if it’s a recession as much as the buyer becoming more aware of their options.
Who clicks on online add links?
Do you?
If not who does?