Online Ads Stagger Amidst Stagnant Revenue Growth

Date:   Monday , December 01, 2008

The supposed deliverance of the media industry, online advertisements, is seen to stagger amidst a stagnant revenue growth. “Anyone who isn’t prepared for ads to go down by 40 percent is crazy,” asserts Gawker Media publisher Nick Denton.

The continuous attack of the frenzied economy is constraining investments, which imply investments in advertising too. A peek into the ad revenues of the four Web bellwethers ? Google, Yahoo!, Microsoft, and AOL ? that together account for the largest share of online advertising reveals that they eke out a meager growth of 0.6 percent, quarter over quarter. The sequential growth rate was 12.7 percent in the fourth quarter of 2007, 2.8 percent in the first quarter of 2008, and 1.1 percent in the second quarter.

In fact, JP Morgan’s Internet analyst Imran Khan has slashed his growth projection by more than half from 16 percent to 6 percent. He also sees an overall spending, fueled by search ads on Google and Yahoo!, growing by 13 percent in 2009, down from a previous projection of 19 percent. If a similar trend continues the results could then be worse than the dotcom bust, with spending on advertising declining by upto 40 percent.

Thus, firms cutting down on plans of further investments due to weaker budgets are in turn leading to a decline in the price of online ads. As per the reports of an ad network optimizer, The Rubicon Project, the average price for an online ad at “thousands of sites and 270 ad networks” dropped by 11 percent in the last quarter.

However, the sector is still bullish in its growth compared to other media like TV, radio, and print, with TV ads losing around 30-45 percent and print and radio losing some 11-12 percent.