Internet resumes gains in advertising
Published: October 21, 2009, 12:30 am
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SAN FRANCISCO — After bogging down in the recession, Internet advertising is regaining the momentum that has made it the decade’s most disruptive marketing machine.
The signs of an online revival are becoming apparent even as advertising in print and broadcasts remain in a slump that has triggered mass layoffs, pay cuts and other upheaval.
Internet advertising was just about the only bright spot in the third-quarter reports of two major newspaper publishers, the Gannett Co. and McClatchy Co. Both companies still are dealing with steep declines in print ads — an imbalance most analysts predict will take years to resolve.
The harsh reality is that much of the advertising in long-established media, particularly in the classified sections of newspapers, never will rebound to prerecession levels, said Lauren Rich Fine, a longtime media analyst who is now a professor at Kent State University.
That grim outlook contrasts sharply with the growing location of advertising budgets to the Web, where potential customers are spending more of their time. Internet ad rates also are lower, and the returns on online ad investments are easier to quantify.
Even when they buy time in other media, advertisers also need to promote their wares on the Internet.
“You can draw a straight line from the time when people hear an ad on the radio or television to when they search for that company on the Internet,” said David Karnstedt, chief executive of Efficient Frontier, which helps manage ad campaigns on search engines.
These trends will give Internet advertising 19 percent, or nearly $87 billion, of the worldwide ad market in 2013, up from just 4 percent, or about $18 billion, in 2004, according to PricewaterhouseCoopers and Wilkofsky Gruen Associates.
That would make the Internet the third-largest marketing medium. Television is expected to remain on top, with $168 billion, or 36 percent of the global ad market. Newspapers would still be No. 2, but their $92 billion in advertising revenue is projected to account for 20 percent of the global ad market, down from 28 percent in 2004.
Companies still seem reluctant to spend on more elaborate campaigns, partly because they tend to be more expensive and not as well-aimed as search ads. The reticence is the main reason behind Yahoo’s report Tuesday of its third-consecutive quarterly decline in ad sales. Yahoo’s ad revenue fell 12 percent after declining 13 percent in the first half of the year.
David Hallerman, a senior analyst at eMarketer, says it’s too early to conclude the entire Internet advertising market is on the upswing. “It’s more like the patient had a 105-degree temperature and now it’s down to 100 degrees,” he said.
Google provides the most compelling evidence for an online recovery.
Its search engine powers an online network that has grown worldwide ad revenue to more than $22 billion annually from $411 million in 2002. The company’s ad revenue rose 8 percent in the third quarter, the fastest pace so far this year.
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