• by Joe Mandese  @mp_joemandese, August 5, 2009

Worldwide spending on Internet advertising contracted 5% during the second quarter of 2009, marketing the second consecutive quarter of contraction, according to estimates released this morning as part of IDC's "Worldwide and U.S. Internet Ad Spending Report."

The analysis indicates all global regions posted losses in online ad spending, with the exception of Asia/Pacific and Japan, which had slight gains in the second quarter.

U.S. online ad spending eroded at a faster rate than the global average, contracting 7% during the second quarter, and also marking its second consecutive quarterly decline.

IDC estimates the U.S. online advertising marketplace was $6.6 billion during the second quarter, down from $6.2 billion in the second quarter of 2008.

All major online advertising formats contracted during the second quarter in the U.S. marketplace, though search ads were marginally affected.

Display ads declined 12%, and classifieds shrank 17%.

A report issued this morning by the equity research team at JPMorgan echoed those points, noting that the search advertising marketplace fell about 2% during the second quarter, which it attributed mainly to a 10% decline in Yahoo's gross search revenues. Both Google and Microsoft were "roughly flat" during the quarter, though the securities firm estimated that Google continued to gain search dollar market share "despite the launch of Bing."

The JPMorgan team said the display advertising marketplace is "showing no signs of recovery," and singled out Yahoo (down 14%), Microsoft and AOL (which were "significantly worse than Yahoo").

But all major publishers' ad sales declined, IDC reported, adding that most fell by double-digit rates, with the exception of Google, which posted "low single-digit growth." "Worst affected were Monster.com with a 31% decline, suffering from the terrible condition of the classifieds business in the current downturn, and AOL, hit by both the weakness in display ads as well as internal sales problems," the report said.

The report concludes "there is good news and bad news" in the quarters ahead. On the negative side of the balance sheet, IDC said most U.S. advertisers would continue to reduce online ad spending during the third quarter of 2009. On the plus side, the company said "things are not going to get any worse in the Internet ad industry."

"We think the industry will continue to see losses in the third and fourth quarters, but the growth rates - or the loss rates, if you will - will eventually begin to improve," Weide, program director, Digital Media and Entertainment at IDC stated. "However, we also believe the industry may have to wait until mid-2010 until it sees real growth again."