The strongest online ad player in the first quarter was Google, which reported first-quarter revenue of $5.1 billion, up 42.0% from a year earlier. Google also reported that its number of paid clicks increased by 20% in the first quarter, compared with the same period last year.
While this growth in search advertising is generally seen as a positive force for the online advertising industry, IDC analyst Caroline Dangson expressed some caution in a report published April 18.
“What IDC believes shareholders should be concerned about, however, is Google's continuing dependence on search ads. Strategically, we see stronger growth in display, rich-media and video ads in the future,” Dangson wrote.
However, her overall assessment of Google's first-quarter earnings report was optimistic.
“Not only is this good news for Google but also for the Internet advertising sector at large,” she said. “It indicates that the Internet will be resilient even in a weakened economy. Even if there is a pullback in overall advertising spend, IDC believes Internet advertising will continue to grow, with advertisers shifting money from traditional media to new media.”
Internet ad company Yahoo also reported growth in the first quarter, with revenue totaling $1.8 billion, up 9.0% from a year earlier. However, while Yahoo's performance beat expectations, analysts said it wasn't strong enough for Microsoft to sweeten its $31-a-share bid for the company.
“According to our analysis, Microsoft's offer is more than fair, and we would recommend that shareholders approve the transaction,” said William Morrison, analyst at investment banking firm Think/Panmure.
Seeking to broaden its reach into the online advertising market, Microsoft in January made an offer valued at $45 billion for Yahoo, which Yahoo's directors turned down.
Industrywide online ad revenue for the first quarter, as reported by the Interactive Advertising Bureau, was not available at press time. Earnings reports by several large media companies show that while growth in online advertising is continuing, the pace is slowing compared with the past few years of accelerated growth.
For example, the New York Times Co. reported that Internet revenue grew 11.6% in the first quarter, compared with 21.6% in the first quarter of 2007.
Total revenue for the company decreased 4.9% to $747.9 million in the first quarter.
Gannett Co., publisher of USA Today, reported that its online revenue grew by 6.5% in the first quarter, compared with 16.0% in the first quarter of 2007. Total revenue fell 8.4% to $1.7 billion, driven down by declining retail and classified advertising.
At CNET Networks, which derives most of its revenue from online ad sales, revenue for the first quarter totaled $91.4 million, up 3.0% from a year earlier. However, revenue growth slowed down from 10% in the first quarter of 2007. M