Blodget Forecasts Suspended Growth
- by January 9, 2001
In a research note released yesterday morning, noted Merrill Lynch Internet analyst Henry Blodget said he now expects overall online ad spending this year to total $8 billion, the same as spending in 2000.
"We are further reducing our estimate for the online advertising market in 2001, as a result of continued cutbacks by dot-coms and a weaker overall advertising environment," Blodget wrote. "Our new estimate for 2001 is $8 billion, flat year-over-year, down from $9 billion, or 15% growth (six months ago, we expected 30% - 40% growth). We continue to expect market growth of about 30% in 2002."
Blodget said the environment continues to worsen versus analyst expectations, and the seasonally weak Q1 will be the toughest quarter in terms of Y/Y growth. "We also continue to expect the market to strengthen in the second half of the year, when the impact of the dot-com bubble has worked its way out of the system.
He also said that over the last six weeks, advertising-driven stocks have stabilized, and he thinks they are in the bottoming process. "The stocks have led the market on the way down, and we expect them to lead it on the way up. This said, we are not looking for significant appreciation until the market stabilizes vs. expectations (stops getting worse)."
Blodget noted that his estimates are far lower than others. In December, two market research firms unveiled comparably bullish estimates for 2001 and beyond. Universal McCann forecasted that U.S. Internet spending would grow 65% in 2000 and 60% in 2001. Zenith estimated that world-wide Internet advertising will increase 43% in 2000 and 40% in 2001. Also, the Myers Group upped its 2001 outlook in late 2000 to 70% growth from a previous forecast of 50% growth.
"While we believe these estimates are far too aggressive, we are encouraged by the optimism, particularly because two of the forecasters hail from global media buying firms."
