Cause For Celebration: Online Ad Spending Falls Just 5%

Online ad spending fell 5% to $5.5 billion during the first quarter of 2009, marking the first year-over-year decline for any quarter since 2002, according to new data released Friday by the Interactive Advertising Bureau and PricewaterhouseCoopers.

That total also reflects a drop of about 10% from the $6.1 billion spent in the fourth quarter, when ad dollars tend to rise in connection with the holiday shopping season. Many industry forecasts have predicted single-digit growth for online ad spending in 2009, but if the current pattern continues, those projections may soon begin to look overly optimistic.

Trying to cast the ad decline in the best possible light, the IAB stressed that the Internet has not been as severely affected as other media in one of the worst ad marketplaces in decades. "Current economic conditions are clearly challenging," said David Silverman, a PwC assurance partner, in a statement. "Nonetheless, interactive media continues to consume a larger piece of the overall advertising pie."



While online advertising overall increased 11% in 2008 to $23.4 billion, spending was roughly flat from quarter to quarter -- ranging from about $5.7 billion to $6.1 billion. That trend, combined with the first-quarter drop, makes it seem more likely that spending in 2009 will be flat-to-down rather than showing even modest growth.

At the OMMA Global Hollywood conference in March, economist Dr. Paul Kedrosky projected that online ad dollars would fall 8%-9% in 2009, with traditional ad spending falling even farther amid a slumping GDP.

But most analysts, while revising their forecasts downward, still project gains this year despite the dismal economy. Market research firm eMarketer, for instance, has most recently predicted online ad growth of 4.5% this year to $24.5 billion. The new IAB report may prompt some to revise expectations downward again.

Smaller-than-expected job losses in May reported Friday gave some hope of a recovery, even as the unemployment rate hit 9.4% -- its highest point in more than a quarter century. But Federal Reserve Chairman Ben Bernanke warned earlier this month that any recovery will be slow, and that the weak labor market and tight credit conditions will continue to weigh on consumer spending. IAB Revenue Growth Chart

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