NEW YORK (AdAge.com) -- Internet-advertising revenue in the U.S. plunged 5.3% to $10.9 billion in the first half of the year compared to the same six-month period a year ago, according to the Interactive Advertising Bureau and PricewaterhouseCoopers, which compile online-ad spending totals every quarter.
The industry association tried to put a positive spin on the numbers: While online-ad revenue is down, the web is still faring better than most other ad-supported media channels.
"Based on these historical percentages, one can envision a $22 billion to $23 billion year," said David Silverman, a PricewaterhouseCoopers Assurance partner. "At that rate it will be the second-largest year in internet advertising history." (Last year, marketers spent $23.4 billion online.) Added Sherrill Mane, senior VP-industry services at the IAB: "The internet decline was relatively minor in the big picture."
The online-ad spending decrease was not shared across the board. Search was up 2% and grew in importance: A year ago it accounted for 44% of total online-ad spending; in the first half of 2009 it made up 47%. And overall, marketers continued to put their ad dollars toward performance-based advertising, which includes search and lead generation. This year it made up 58% of total first-half online-ad spending, up from 54% over the same period last year.
Display advertising, the second-largest internet-ad category, was down 1% in the first half. The biggest growth came in digital video, up 38%.
Meanwhile, classifieds and directories made up the bleakest category, representing about 10% of overall online-advertising spending, and down 38% this year. An increase in free and low-cost alternatives, such as Craigslist, and a decrease in the jobs and homes market, accounted for the declines.
While IAB and PricewaterhouseCoopers didn't have their own comparisons to how other media performed, they cited Nielsen numbers released a few weeks ago that showed only cable TV fared better than the internet in the first half of 2009. But the Nielsen figures for online-ad spending in the first half are very different from the IAB's, said Ms. Mane, because the methodologies are very different. IAB collects the revenue data from its member companies, while Nielsen uses different data sources. Additionally Nielsen looks only at impression-based display advertising; the IAB/PricewaterhouseCoopers report looks at all internet ad formats.
Advertising bright spots
There were a few bright spots among ad spenders. By category, telecom spending grew 1%, entertainment spending was up 0.5% and media was up 1%. Consumer package goods were down 1%, although the share of CPG advertising going to internet remained static, Mr. Silverman said.
"This [downward spending] trend is due to the economy, not the diminished interest in the area by consumers or advertisers," said John Deighton, professor of business administration at Harvard Business School.
He pointed out some trends he's watching: Time spent on social-networking sites has tripled, while advertising doubled, according to Nielsen data. "[Revenue reveals] small numbers but very substantial growth," Mr. Deighton said.
So the big question is, has the slowdown in online ad spending hit bottom? David Hallerman, senior analyst at eMarketer, said it has, but cautions that "the climbing back is going to be slow. ... Indications are that while the second half of the year will still be down compared to second half of last year, it won't be down as much as the first half."
Show off rich, innovative advertising. B-to-b marketers are wrestling with their own unique challenges--and proving that they’ve got what it takes to close the deal. Join an impressive group of past winners that includes Adobe, Avon, Cisco, Oakley, Time Warner Cable Media and more.
Extended Deadline: October 19, 2015. Enter now.