Though online advertising in the US grew by more than 10% overall in 2008, the dramatic slowdown in the fourth quarter has prompted media analyst Screen Digest to forecast an overall revenue drop of nearly 5% for the medium in 2009.
As a result of what it calls a Q408 “tipping-point,” Screen Digest has revised its 2009-2010 forecasts for online advertising in the US. The firm now predicts that all categories and sub-categories except video will decline in 2009:
- Banner advertising will drop 8.8% and will not be fully compensated by the double digit growth of online video, so that the display category will be down 3.6%.
- Search will shrink by 2%.
- Non-display categories such as classifieds will experience double digit falls.
Overall, the total internet advertising market will shrink by 4.8% in 2009 and only stabilize (up 0.4%) in 2010.
Screen Digest’s view of the market for 2009 is based on the US IAB’s recently released full-year report for 2008. While internet advertising increased in 2008, the fourth quarter was almost flat at +2.6%, a significant change from the first nine months of the year, which were up about 15%.
Display Slows Down
Online display advertising grew by just 8% for the full year, much lower than its previous growth of 26% in 2006 and 31% in 2007. Screen Digest said that online display’s 4% decline in Q408 advertising would have been even steeper had it not been for the growth of the online video format that nearly doubled in 2008. Screen Digest estimates that online video (pre-roll) ad sales reached $1.2 million, up 64% over 2007.
Search More Dynamic
Search has remained much more dynamic than online Display in 2008 and, at least up to Q308, seemed recession-proof, Screen Digest said, attributing its resilience to its high degree of accountability and scalability. In contrast, display internet advertising is now a mature medium, and is suffering the same cost-per-thousand deflation affecting all other branding media.
Automotive, Real Estate & Finance Struggles Trickle Down
Despite search’s growth, the deepening of the economic recession in Q4 has caused both search and display to suffer, Screen Digest noted. Search has seen its growth rate halved while display has experienced negative year-on-year quarterly growth for the first time since the dot-com crash of 2001-2002. Online display, search and classifieds are also suffering from the particularly bad state of three critical client sectors: automotive, real estate and finance.
The sudden slowdown of search reported by the IAB US is consistent with the plateauing of US quarterly revenues reported by Google throughout the year, Screen Digest said. Year-on-year quarterly growth went down from 31% in Q108 to only 13% in Q408.
“Looking at the US results from the fourth quarter last year, it’s very clear that online display will fall this year despite the growth of video,” said Vincent Letang, senior analyst at Screen Digest. “Search was still growing in Q408 but the growth rate has slowed down so much that we now believe the next quarter will be in the red too – and online Classifieds will continue to fall.”
Screen Digest confirmed that the firm anticipates the total US ad market to experience double-digit drops in 2009, while some legacy media (print, local TV) could be down by up to 20%.