Is Online Safe From the Meltdown?

• Posted: Thursday, October 16, 2008
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• Author: pradhana
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• Filed under: Business Analysis

The economy and online ad spending

Online ad spending data from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) for the first half of 2008 is in.

The numbers seem generally strong, showing double-digit growth compared with the first half of 2007 in several categories: search, display—which includes banners, rich media and video—and e-mail ad spending. And the total US online ad growth rate of 15.2% is nearly the same as eMarketer’s 17.4% projection for all of 2008.

Yet online classified ad spending was down by more than 5% and may turn out to be a canary in the coal mine, showing the first signs of dizziness in an increasingly toxic environment.

“The negative growth for classifieds closely reflects economic weakness,” said David Hallerman, senior analyst at eMarketer. “Whether used on eBay to sell products, on job sites by employers, or for real-estate sales, classified ad buys tend to be short-term purchases with short-term objectives.

“In contrast, most display-related ads, such as banners or video, are contracted ahead of time. For that reason, they are less of a mirror of the current state of online advertising than classifieds,” Mr. Hallerman continued.

The problem is not that banks spend so much on ads themselves. In a recent MediaPost article, ZenithOptimedia said, “The bank failures will have a fairly small direct effect on ad expenditure, since financial advertising contributes only about 4% of global ad expenditure, but fears for the future will cause consumers to cut their spending, while companies carefully inspect their budgets to find cost savings.”

Jack Myers also noted that the ad industry was undergoing a major transformation even before the crisis hit.

“The danger of ascribing downward spiraling economics of ad spending to the economy alone is that it camouflages several more endemic causes for ad spending declines,” Mr. Meyers wrote earlier this week. “The media marketplace is transitioning from one in which demand has exceeded supply (even as supply has grown exponentially)...to a marketplace in which the availability of supply is outpacing demand.”

Read more - eMarketer

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