Commentary

Just an Online Minute... Online Ad Revenues to Drop

  • by March 15, 2001
As one expert sees it, most of the online ad players and publishers still have overly optimistic full-year earnings predictions, which are likely to be cut in coming months.

Yes, according to Merrill Lynch's famed analyst Henry Blodget, things are getting worse in the online ad market. In a conference call yesterday, Blodget predicted that online ad revenues will actually decrease 25% during the year.

Interestingly enough, two months ago Blodget predicted "modest sequential increases" beginning in second quarter of 2001, but now he says the market won't work itself out until near the end of the year.

Blodget believes that during the year, market share will shift toward "top sites," online direct marketing firms specializing in email marketing and link sharing, and pay- for-performance companies.

Not surprisingly, AOL Time Warner's online properties also would continue to gain share in 2001, according to the report, expanding from 38 to 44%. Yahoo!, however, wouldn't be one of those expanding its piece of the pie. Blodget said he expected the portal's market share to fall 16 to 11%, through a decline in long-term contracts and continued weakness in its banner sales.

Blodget did, however, restate his belief that the present online market is cyclical rather than an intrinsic weakness of the sector -- and is the result of "a brutal correction from a severely over-capitalized market in 1999 and 2000."

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