Online Ad Spend Dips 5.3% in First Half

By: Mike Shields/Mediaweek The online ad industry might consider adopting a new slogan for 2009: "We're healthy, all things considered."

U.S. Internet ad spending dipped by 5.3 percent through the first half of the year to $10.9 billion, according to the latest joint spending report by the Interactive Advertising Bureau and PricewaterhouseCoopers. Similarly, during the second quarter, spending slid by 5.4 percent to $5.4 billion.

Following a record fourth quarter in 2008 and several years of unabated double-digital growth, the online ad industry is clearly feeling the impact of the Great Recession of 2009. But during a press conference on Monday, officials took great pains to put the Web's spending declines in context.

Sherrill Mane, the IAB's svp of industry services, pointed to estimates issued by Nielsen and TNS that tracked declines for overall media spending during the first half of the year at about 15 percent. "The Internet decline is relatively minor in the big picture," she said.

Indeed, the word "relatively" was spoken often during Monday's conference call with the media. Guest commentator Professor John Deighton of Harvard Business School said that despite a rough ad environment, the Internet is still benefiting from increased advertising excitement because it remains a rapidly growing medium. The declines seen in online advertising are "attributable to the economy and not diminished interest in the medium," he said. The industries that pulled spending from the Web are the industries that are hurting the most, like autos and financial services.

Meanwhile, the entertainment and media categories are actually putting more money on the Internet. "Advertisers follow audiences and eyeballs are moving online," he said.

More eyeballs are shifting to online video -- which provided a bright spot in the IAB/PwC report. Video ad spending surged 38 percent during the first half of '09 to $477 million.

However, that figure is relatively small in an industry that is still dominated by search. As advertisers pumped more performance-focused dollars into the medium, search spending actual rose during the first six months of the year by nearly 2 percent, reaching $5.148 billion, or a hefty 47 percent of the total ad market. Performance-based advertising now accounts for 58 percent of all dollars spent online vs. 38 percent for CPM-based spending.

Despite that trend, however -- and even with pricing challenges in the display ad market -- spending on display declined just 1 percent to $3.759 billion.

The hardest hit segments this year have been rich media (down 13 percent), classifieds (down 31 percent) and sponsorships (down 20 percent).

-- Nielsen Business Media