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Online Advertising Spending Expected to Be Down for 2009

Drop of 2.9% Is First Decline Since Internet Bubble Burst in 2002

By Published on . 4

NEW YORK (AdAge.com) -- 2009 was a bad year for online advertising, too. This year figures to be the first down year for online ads since 2002, the hangover from the internet-bubble years.

Spending on online advertising is expected to come in at $22.8 billion in 2009 in the U.S., down 2.9% from a year ago, due to steep declines in sponsorships, classifieds and e-mail advertising, according to a projection from eMarketer issued today. Banner ads were virtually flat with 2008.

The lone bright spot: search, which will grow 4% overall, proving itself the most resilient and counter-cyclical form of online marketing. Video also grew, but it's still too small a category to make a difference in the overall numbers.

Ad spending

EMarketer's latest figures come two weeks after the Internet Advertising Bureau said online ads declined 5% in the first six months of 2009. EMarketer benchmarks its figures on the IAB and uses it as a base for its projections for the second half of the year.

Analyst David Hallerman said he believed he knew enough to project the end of 2009 after seeing Google report strong earnings last week, but before seeing anything from Yahoo or Microsoft, which report their third-quarter earnings this week.

Increasingly, search drives the online ad market, and in the U.S., it is more than double the size of online display.

About a quarter of all online advertising in the U.S. flows through Google, and its strong showing was enough to fuel a slight recovery in the second half of 2009. "The trend here is clearly up and that alone will support a mild rebound in the second half," Mr. Hallernan said.

Ad spending

Search is both a real-time indicator of marketer sentiment and the sentiment of consumers, who are doing more commercial-related searches. Mr. Hallerman, like a lot of analysts and marketers, believes the economy hit bottom earlier this year.

Broadly speaking, the display-ad market is challenged by the economic cycle, but also because the largest Ad Age 100 advertisers are still allocating small percentages to online marketing. Online gets less than 10% of ad spending in the U.S. "The dollars still aren't following the eyeballs online," Mr. Hallerman said.

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