Article Originally published in the Capital Region Business Journal - December 2008 - (note that the September 2008 - December 2008 issues of CRBJ were not posted online - this link will take you to their main page)
 

Title: Signs of weakness in online classified ad spending

By: Jonny Buroker

FIRST HALF OF 2008 WEAKENS, BUT STILL STRONG

During the first half of 2008, Online Ad spending showed double-digit growth compared with the first half of 2007 in several ad categories: search, display—which includes banners, rich media and video, and e-mail ad spending. Total US online ad growth was 15.2% over the same period in 2007, which was inline with many predictions of continued strong growth (first half 2008 data provided by Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC)).

However, there is a dark cloud looming. Online classified ad spending was down by more than 5%, which may be one of the first signs of weakness in this financially unstable 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. 

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.” 

Many companies that predict future ad spending have recast their numbers in recent months. 

As paidContent.org recently detailed:

• Barclays changed its US online ad forecast for 2008 through 2012 to $24.79 billion (+16.9%), below its previous forecast of $26.17 billion (+23.4%), in May. They expect online advertising to rise at a 14.3% three-year compound annual growth rate (CAGR), resulting in the Web accounting for 13% of total US ad dollars by 2011.
• J.P. Morgan lowered its 2008 US display market estimate to $8.2 billion from $8.6 billion. MediaPost said that represented 14% year-over-year growth, compared with its previous estimate of 20% growth. J.P. Morgan now expects online display to reach $9.4 billion in 2009, down from its previous estimate of $10.0 billion (16% growth compared with a previous estimate of 17%).
• Cowen said in July 2008 that 2008 US online ad market growth would be 16% year-over-year, a drop from its previous estimate of 19%.
• MAGNA also reduced its 2008 online ad spending estimates in July 2008 to 12% growth, down from the 16.5% it predicted in December 2007.
• eMarketer estimated in August 2008 that online ad spending would reach $24.9 billion this year, down slightly from its March forecast. That still represents 17.4% growth over 2007.

The bottom line is, in these uncertain times, it pays to evaluate your current marketing strategy, understand where your ad dollars are going, and determine which approaches are providing a positive return on investment.  Work closely with your Internet Marketing Consultant to review your strategy and implement any corrective changes.