Surprise: Online Advertising Down
No safe harbor.
Asked about a possible recession early in 2008, IDC analyst Karsten Weide said, “We think there will be some effect on advertising spending overall, but online ad spending will almost be unaffected—even if there’s a depression.”
What a difference a year makes.
According to the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC), total online advertising revenues in Q1 2009 fell to $5.48 billion, down 10% from the previous quarter and down 5% from Q1 2008.
That snaps a growth streak that started in Q2 2008 and is the first negative year-over-year rate since 2002.
David Silverman of PwC, playing matters down, said, “Current economic conditions are clearly challenging.”
Online advertising had been relatively unaffected by the downturn, partly because it used to be considered experimental, but it is now an essential part of the media mix for many advertisers.
“In some ways the decline further reinforces how online ad spending is a central part of the mainstream,” said David Hallerman, eMarketer senior analyst. “As other media are experiencing even greater ad spending declines, the Internet cannot resist larger economic forces.”
Backing up Mr. Hallerman’s thesis, Nielsen Co. figures show how widespread the ad decline has been.
Nielsen puts the Q1 Internet display advertising decline at only 3.4%.
Still, many pundits thought that digital advertising would not dip into negative growth because it was less expensive and offered more measurability than traditional media channels. But when companies don’t have money to spend, it doesn’t matter how attractive an offering is.
“The Q1 results from the IAB and PwC came in lower than eMarketer expected,” said Mr. Hallerman. “Whether the new numbers are an indicator for spending trends through the rest of the year, however, will not be clear for several months.”
If spending stays relatively flat from Q1 on, the online sector would see total 2009 spending of around $22 billion, lower than even most bearish estimates back in 2008.
“We’re confident that growth will resume as the US economic climate improves,” said IAB President Randall Rothenberg.
Until then, online advertising will continue to struggle. [eMarketer]
Online Ad Growth Comparisons
The numbers are changing fast.
Two weeks ago eMarketer revised its US online advertising spending growth rate numbers for 2009, and it wasn’t alone.
Due to the rapidly changing economic conditions, a number of the leading sources that track—and predict—online advertising have been revising their numbers, too.
It can be difficult to keep up. So here is an overview of what everyone is now estimating.
To start with, eMarketer had predicted an increase of 8.9% for 2009, but now predicts that the rate of growth for US Internet ad spending in 2009 will be approximately one-half the rate of growth for 2008—only 4.5% this year.
But how does that compare to what other sources are predicting?
Well, some are much lower, and others are higher.
Starting at the low end, UBS foresees a disheartening 6% drop in growth for 2009, Oppenheimer & Co. foresees a 1.8% fall and Cowen and Company is also on the negative side at -0.9%.
Several other sources are barely on the plus side of growth for this year. Barclays predicts a meager 2.3% increase from 2008 and Jack Myers 2.9%.
Bernstein Research is a little more optimistic with a forecast of 3.8% growth. With a brighter outlook, Morgan Stanley says US online ad spending will grow at nearly a 10% rate and ZenithOptimedia is predicting a rosy 18.1% jump for 2009—that is unless they too revise their numbers down. [eMarketer]
Online Advertising Pushes Through
The recession slows, but does not stop, online ad growth.
As strange as it may sound, the economic downturn may speed up the transition to digital advertising for many marketers.
The Internet’s share of total media ad spending is rising by at least 1 percentage point every year. Simply put: Marketers are spending more on Internet ads, while spending less on advertising in other media, such as newspapers, radio and magazines.
Furthermore, eMarketer projects that the online share of ad dollars will continue to grow, rising from nearly 10% this year to slightly more than 15% in 2013.
“The spending shifts predate the recession,” says David Hallerman, eMarketer senior analyst and author of the new report, US Advertising Spending: The New Reality. “But the current economy is reinforcing the new advertising models—and making them more permanent.”
Does this make sense in light of the fact that the rate of growth for even Internet ad spending is slowing? Mr. Hallerman thinks it does.
“Digital marketing offers compelling benefits, especially for cash-conscious companies,” he says. “Marketers can more readily measure the results of Internet advertising than with most traditional media. This produces more-efficient advertising and higher ROI, which in turn pushes traditional media to compete with lower pricing.”
Which puts more pressure on traditional media’s bottom line.
“At the same time, successful Internet advertising creates a new paradigm for marketing on other media,” adds Mr. Hallerman. “Search is the prime example of the new model.”
When marketers link ads to an individual’s stated interest at the precise moment that interest is expressed—as happens with a search query—relevance breaks down the usual resistance.
“Advertising that consumers welcome is the new reality,” says Mr. Hallerman, “combining effectiveness with efficiency for marketers.”
And in the not-so-long run, that’s where the money will go. [eMarketer]
Economy Deals Online Ad Spending a Hit
Digital still stronger than traditional
There seems to be more bad news about the economy every day, and falling ad spending numbers are part of the mix. Although online advertising is still on a positive growth curve, that growth is slowing and will dip into the single digits for the first time in 2009.
eMarketer’s revised projection, benchmarked against the latest Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) data, puts online ad spending at $25.7 billion in 2009. That is only 8.9% over the $23.6 billion that will be spent in 2008.
In August, before the full impact of the economic slowdown was revealed, eMarketer predicted online ad spending would grow 14.5% in 2009.
Not only is the new projection lower, but recovery is expected to take longer. In 2010, online ad spending growth will return (barely) into the double digits at 10.9%, and in 2013 it will only hit 13.5%.
Even paid search, which has grown at an outsize pace for years, will see a mere 21.4% rise in spending this year.
Again, the slowing is relative, since paid search spending growth will still outstrip the overall online market through 2009. There’s a reason paid search will stay robust through the economic downturn, according to David Hallerman, senior analyst at eMarketer.
“Especially in economic turmoil, search is more trackable than any other ad format,” said Mr. Hallerman. “At this stage, it is a tried-and-true format that is supporting online growth.” [eMarketer]
Economy Deals Online Ad Spending a Hit
Digital still stronger than traditional
There seems to be more bad news about the economy every day, and falling ad spending numbers are part of the mix. Although online advertising is still on a positive growth curve, that growth is slowing and will dip into the single digits for the first time in 2009.
eMarketer’s revised projection, benchmarked against the latest Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) data, puts online ad spending at $25.7 billion in 2009. That is only 8.9% over the $23.6 billion that will be spent in 2008.
In August, before the full impact of the economic slowdown was revealed, eMarketer predicted online ad spending would grow 14.5% in 2009.
Not only is the new projection lower, but recovery is expected to take longer. In 2010, online ad spending growth will return (barely) into the double digits at 10.9%, and in 2013 it will only hit 13.5%.
Even paid search, which has grown at an outsize pace for years, will see a mere 21.4% rise in spending this year.
Again, the slowing is relative, since paid search spending growth will still outstrip the overall online market through 2009. There’s a reason paid search will stay robust through the economic downturn, according to David Hallerman, senior analyst at eMarketer.
“Especially in economic turmoil, search is more trackable than any other ad format,” said Mr. Hallerman. “At this stage, it is a tried-and-true format that is supporting online growth.”
Big Spenders Put Local Online in the Mix
National advertisers pursue diversified strategy.
Nearly one-half of US national advertisers surveyed are currently pursuing local online advertising, according to a September 2008 study conducted by Sterling Market Intelligence for Marchex. More than four out of 10 said they were putting at least 25% of their online marketing budget into local targeting.
“The data shows that national advertisers clearly understand the Internet drives in-store sales and they’ve begun to integrate local into their marketing mix,” said Greg Sterling, principal of Sterling Market Intelligence, in a statement.
Some types of local online advertising spending may be more effective than others, according to a study published in August 2008 by the Online Publishers Association and JupiterResearch.
The researchers found that about one-half or more of US adult local content users surveyed trusted local newspaper, TV station, portal and yellow page Websites. Respondents were more skeptical about content on local city guides, magazine, classified and user review sites. [eMarketer]
What's the Right Amount of Online Advertising?
It can depend on the type of ad.
When Internet users are viewing ad-supported content, how many over-content ads are they willing to watch?
The answer is somewhere between one and five ads that interrupt content per hour, according to 61% of US adult Internet users surveyed in September 2008 by Dynamic Logic. The median response was two per hour.
Two-thirds of respondents thought over-content ads on the sites they visited had increased during the previous six months. That was up from the percentage who said so in 2005 (57%).
The Center for Media Research said Internet users thought they were seeing more interruptive ads because they visited a wider array of sites, which exposed them to a greater variety of ads and ad types.
Just over one-fifth (21%) of respondents to the Dynamic Logic survey said that over-content, or “intrusive” ads, were never appropriate, even to support free Web content.
The definition of “intrusive” can vary depending on the ad and the user. Irrelevant ads were considered intrusive and annoying by 72.4% of adult Internet users surveyed in February 2008 by TNS Global for TRUSTe. [eMarketer]
Online Ad Networks Grow Reach, Appeal
Weaving profitable tapestries from ad remnants
Even the biggest Websites do not have the reach of advertising networks. Google, viewed by 70% of US Internet users, was just ninth on the list of top ad-supported media properties and ad networks in July 2008 in terms of reach, according to comScore Media Metrix.
Google, Yahoo! and other portals are keenly aware of the power of ad networks, which is why they have networks of their own.
The Interactive Advertising Bureau (IAB) and Bain & Company recently completed a benchmarking study of online ad networks, and found two main reasons for the networks' rise. First, available ad space is growing because of inadequate pricing tools and inventory management discipline, leading publishers to seek out ways to get some type of return on unsold ads.
Read more - eMarketer
Supponor Introduces Novel Technology for Segmented Advertising in Live Sports Broadcasts
Northzone Ventures and Conor Venture Partners Co-Lead the Financing Round to Bring Digital Billboard Replacement Solution DBRLive for Sports Marketers
Supponor Ltd, a pioneering provider of Digital Billboard Replacement (DBR) solutions, today announced the successful closing of its Series A funding round. The funds will be used for international sales and marketing of Supponor DBRLive, a novel system for precise masking and replacement of on-event advertising content in live sports broadcasts. The system opens up a wide range of opportunities for targeted and localized sports marketing.
The funding round was led by Northzone Ventures, one of Europe’s leading early stage venture capital firms, and Conor Venture Partners, a Finnish early-stage technology venture capital firm and an existing investor in Supponor. The funding of 6 million Euros, a significant investment for a pre-revenue company, will be used to leverage the business opportunities that Supponor DBRLive brings to digital advertising agencies and television right holders. With the new funding, Supponor will launch DBRLive in Europe and the United States, the world’s leading markets in sports advertising.
“Television broadcasts of the world’s most popular sports events are watched in exactly the same format in highly different markets, whereas advertisers are looking for segmented audiences”, said Mr. Juha Ruohonen, Supponor CEO. “Billboard ads visible throughout the sporting events create attention values that are manifold compared with ads on commercial breaks. The ability to digitally change the billboard content to best suit different audiences has achieved great interest from both TV rights holders and advertisers”.
”TV rights and advertising slots in sporting events are bought and sold for huge sums of money around the globe”, said Mr. Björn Stray, General Partner at Northzone Ventures. “DBRLive gives organizers, sports clubs, sports federations and television right holders an opportunity to multiply the value of their events by enabling advertisers to target their messages. We are impressed by Supponor’s system and are true believers in its success”.
Billboard content digitally changed with DBRLive looks very similar to real physical billboards. Patented software technology calculates the position of the billboards in real time which allows for smooth and exact placing of digital content in live broadcasts. The system works in both indoor and outdoor events, regardless of weather and lighting conditions, and irrespective of people or objects moving in front of the billboards. The result is a natural-looking billboard that is relevant to viewers in different markets.
”There are already several players in the market that produce digital content and place it on top of the television picture”, explained Mr. Ruohonen. “Their offerings typically range from graphics that help viewers follow the event to digital ads that appear on screen independently of physical billboards. The unique advantage of DBRLive is that digital ads are placed exactly on top of real-world billboards, which allows advertisers to reach their desired target groups without a risk of being blamed invasive or intrusive”.
”The traditional television broadcasts will expand to multiple new channels and services, including IPTV, web and mobile”, said Mr. Manu Mäkelä, Partner at Conor Venture Partners. “Directly applicable in all digital channels, the opportunities available through full deployment of DBRLive are exceptionally exciting. We have already been working with the Supponor team for two years in perfecting the technology, and bringing Northzone on board to boost the market entry is a great leap for the company”.
Supponor, based in Finland, is currently negotiating with several sports event organizers and television right holders in Europe and the United States. /PR
China Goes for the Online Gold
Like seemingly everything else in China, online advertising is growing fast
In terms of sheer numbers of users, 2008 marks the year that China overtakes the US as the largest Internet market in the world.
"By 2012 there will be 373 million Internet users in China, 150 million more than in the US at the same time," says Ben Macklin, eMarketer senior analyst and author of the new report, Online Advertising in China: The Olympic Year. "Despite this fact, the Chinese Internet market is still relatively immature and only in its first phase of growth.
"This makes China a large—and growing—opportunity for online advertising."
eMarketer forecasts that online advertising spending in China will grow from RMB7 billion ($924 million) in 2007 to RMB29.26 billion ($4.9 billion) in 2012. In projecting yearly growth rates, eMarketer assumed a strong uptick in 2008 due to the Beijing Olympics and annual growth above 30% to 2012.
"The 2008 Beijing Olympics will be a significant driver of advertising spending growth," says Mr. Macklin, "but positive underlying economic and demographic indicators point to continued advertising spending growth well beyond this year."
Read more - eMarketer
Online Ad Spending Holding Strong
Strong growth, good prospects
For the full year 2007, online ad revenues totaled $21.2 billion, according to the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) "2007 Internet Advertising Revenue Report." That was 26% higher than 2006, which was itself a record year.
The IAB and PwC said that Q4 2007 Internet advertising revenues reached $5.9 billion, the highest ever for a single quarter and 24% higher than the same period in 2006.
"Despite the current state of economic uncertainty, 2007 was another record year and the 13th consecutive record quarter," said David Silverman, partner, Assurance, PwC, in a statement.
The IAB and PwC said that search, display, classifieds and lead generation all continued growing. As in prior years, consumer advertisers were the largest category of Internet advertising spending, at 55% of 2007 full-year revenues, up from 52% from the full year 2006.
Read more - eMarketer
Google CEO: Mobile Advertising to Generate More Revenue Than Today's Web
By Lynnette Luna
In an interview with the Frankfurter Allgemeine Zeitung, Google CEO Eric Schmidt said that the next major growth wave for Google in terms of search engine marketing is the mobile Internet. He cited the iPhone as the first mobile device with a good web browser and that more devices will come to market, enabling advertising to become personal. He predicted that within a few years, mobile advertising would generate more revenue than advertising on today's web.
Schmidt said he was less enthusiastic about the advertising possibilities of video portals like YouTube and DoubleClick, and said he generally wasn't happy with the advertising prospects of Web 2.0 in general. Google has invested some $900 million in a deal with MySpace that saw the search engine as the exclusive advertising and search engine. It reached many users but was proving difficult to establish the ad network. "Some things work, and others just don't--but the mobile Internet always works," he said. [FierceWireless]
Perfecting Online Video Ad Tactics
How much does ad format matter?
"Getting Beyond Pre-Roll" was one of the more challenging panel sessions held at the Online Publishers Association Europe conference last week in London.
Although online video ad standards have been established, at least in the US, many questions remain about how such ads may best be used. Panelists were asked how advertisers could best use video formats to engage audiences. The relative lack of breakthrough thinking in this area made for a somewhat subdued session.
Henrique de Castro, head of European sales for Google, stressed the enormous growth in the online video audience recently, but acknowledged that video search has a long way to go in helping audiences get what they want out of it. Mr. de Castro predicted that proper video search would be "sorted" [out] in the next 12 to 24 months, however.
Nada Stirratt, executive vice president of digital advertising at MTV Networks Digital, emphasized that attempting to decide on the best video ad formats was a red herring, because a format viewers found intrusive in one context might be tolerated or even welcomed in another.
Read more - eMarketer
Ad Agencies Thrive on Digital Revenue
Revenues at US advertising, marketing services and media agencies grew 8.6% to $31.1 billion in 2007, according to Advertising Age's "Agency Report 2008." Most of the increase was driven by digital ad spending.
Growth was down slightly from 2006, when revenues grew 8.8%. However, revenues jumped 26.8% in 2007 among digital specialty agencies despite a generally lukewarm ad market.
Overall, digital accounted for 10.2% of US ad agency revenue in 2007.
Ad Age estimates that among the Big 4 ad firms—Omnicom Group, WPP Group, Interpublic Group of Cos. and Publicis Groupe—12.3% of worldwide revenues came from digital services.
WPP's GroupM ranked first in terms of worldwide media revenue. Omnicom's OMD Worldwide is the world's largest media agency, while WPP's MindShare is top in the US, according to Ad Age estimates. [eMarketer]
Targeting, Ad Network Spending Increase
Zeroing in by spreading out.
More than nine out of 10 US advertising agencies and advertisers buying online media plan to work with ad networks in 2008, according to Collective Media's "Ad Network Study 2008." Nearly three-quarters of respondents said that they planned to spend more with ad networks in 2008 than they did in 2007.
Online ad networks represent multiple Web sites that sell advertising and let ad buyers reach broad audiences across categories. The networks are proving popular for both brand and direct marketing.
Ad network usage by both brand advertisers and direct marketers rose by nearly 20 percentage points in the 2008 study to 59.2%. Only 13.4% of advertisers said they only used ad networks for direct marketing purposes in 2008.
Overall, 40% of respondents in the Collective Media study said they planned to increase spending on ad networks by 10% or more in 2008. Three-quarters of those respondents said they would spend 5% or more of their overall online advertising budget on ad networks in 2008, and over one-quarter of agencies and advertisers said they would spend 15% or more on ad networks in 2008.
Read more - eMarketer
UK Advertisers Shy From Social Networks
UK social networking advertising hits a bump.
In 2007, more than half of the UK’s Web users used social networking sites, according to an European Interactive Advertising Association-sponsored study conducted by SPA Research and Synovate.
Despite being popular with UK Internet users, social networks are getting a wide berth from some UK advertisers.
One of the most memorable Internet stories of 2007 centered on a number of high-profile British companies—including Vodafone, First Direct, Halifax, Virgin Media, the Prudential and the Automobile Association—withdrawing advertising from Facebook, because their ads were seen on pages with content promoting the far-right British National Party.
“I estimated that within a year [from January 2008], advertisers would begin to back away from social network advertising,” wrote Michael Masnick, CEO of TechDirt, on that blog. “Apparently, my estimate was wrong. Brands are already staying away.”
Read more - eMarketer
Online Video to Generate Big Bucks
Informa Telecoms & Media forecasts that by 2013, US online TV and video services will generate revenues of $7.9 billion. In 2007, the market was already worth over $1 billion and by 2008, that figure will leap to $4.7 billion.
Though these figures include a la carte and subscription-based download fees, advertising revenue is expected to account for the largest slice at 63% of the 2013 global total.
"The Writers Guild strike brought much of Hollywood to a standstill for several months. The fact that revenues derived from online TV and video were at the heart of the dispute indicate just how important this sector has become," said Adam Thomas, media research manager at Informa.
The UK and Japan are the second and third largest markets, respectively, in terms of online TV and video revenues. In 2008, revenues are expected to reach $842 million in the UK and $605 million in Japan. [eMarketer]
Global Online Ad Spending Marches On
ZenithOptimedia has substantially increased its global online advertising forecasts, reflecting a continued shift from traditional to digital media.
The firm projects that, by 2010, global online advertising spending will reach $67 billion and account for 12.3% of total ad spending. The previous forecast estimated $61 billion and 11.5% respectively.
This year, worldwide online advertising spending will reach $47.7 billion, or 9.7% of total media ad spending, according to ZenithOptimedia.
In the short term, asserts the researcher, online video and local search are providing a boost to online advertising, while in the longer term, behavioral targeting is expected to eventually spur many new opportunities for advertisers.
Aside from the Internet, cinema and outdoor advertising are the only formats expected to gain a greater share of total advertising spending, though not even their combined increase will rival that of the Internet's. [eMarketer]
What’s Holding Up Mobile Advertising?
Are mobile marketers moving ahead or merely spinning their wheels?
”2007 was not ‘the year of mobile marketing’ that it was advertised to be,” says John du Pre Gauntt, eMarketer Senior Analyst and author of the new report, Mobile Advertising: After the Growing Pains. “And 2008 won’t be either.”
Even though mobile marketing and advertising didn’t break into the mainstream during 2007, with events such as the iPhone launch and other under-the-hood improvements, mobile marketers did take strides to move past the experimental stage of development.
In fact, eMarketer forecasts that worldwide mobile advertising spending will reach $19 billion by 2012.
”The vast majority of the spending will be based on text-messaging campaigns,” says Mr. Gauntt, “with mobile display advertising and mobile search constituting the rest of the main market.”
However, compared to other interactive platforms, mobile still remains extremely small in overall spending.
”A basic problem facing mobile marketing and advertising is that, while the business proposition cuts across many industries—telecom, technology, media, marketing, retail—it affects the economics of each industry differently,” says Mr. Gauntt.
Read more - eMarketer
Could an Ad Targeting Law Be Good News?
Opt-in could increase ad value.
The New York Times reported yesterday on a New York state bill that would make it a crime to use personal information for advertising without consumers' consent—punishable by a fine.
The Times said that such a law could "force Web sites to give consumers obvious ways to opt out of advertising based on their browsing history and Web actions."
The article said that this would effectively be a national law, since it would be tough for affected companies to apply the rules just to people in New York.
That sounds like a potentially serious blow to online advertisers. But it could be a blessing in disguise, according to David Hallerman, a senior analyst at eMarketer.
"While transparency about marketer intent will lead some portion of consumers to opt-out, those who say 'yes' will be more valuable, since their willingness to trade Web site tracking in exchange for more relevant ads will clearly signal their preference."
"In fact," he said, "clearer opt-out and opt-in mechanisms for online display advertising will likely make it more effective. It's similar to e-mail marketing: opt-in recipients are hugely more responsive than those who have not agreed to see the marketing messages."
Read more - eMarketer
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