• Adweek, Monday, March 2, 2009 12 PM

Despite the recent slashing of growth estimates by several research firms, online advertising is not in recession, asserts Adweek's Brian Morrissey -- at least, not according to the classical definition of a recession, qualified as three consecutive quarters of negative growth. It may be headed that way, however, as forecaster IDC predicted last week that the sector would contract 5%, which would mark the first quarterly decline since the dot com bust back in 2001.

To be sure, direct response tactics like search and performance-based marketing remain in high demand, but display advertising is struggling. Morrissey points out that graphical display ads suffer from a classic supply and demand problem: there is an "overwhelming" glut of such inventory on the Web. Ad networks have rushed in to fill the void for publishers, but while their networks grow larger, CPMs have gone down. According to an Interactive Advertising Bureau and eMarketer study, ad network CPMs were a mere 60 cents to $1.10.

Lean times for publishers, indeed. In fact, the biggest sellers of display ads -- Yahoo, AOL, and Microsoft -- reported sharp revenue declines in their display businesses. That's likely to continue through the year, says IDC analyst Karsten Weide, as the display cutbacks are more a function of the economy than anything else. "Nobody wants dramatic changes in marketing departments," Weide said. "The savings they're being asked to make are so great that they have to take money out of display, even if they don't want to."

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