Sure seemed that way when PricewaterhouseCoopers and The Interactive Advertising Bureau (IAB) released this year’s Q2 online ad revenue numbers last week. It indicated a 4.1 percent drop from Q1 2002, and a monster 21.9 percent plummet from Q2 of the previous year.
But many online publishers say business is healthier than ever. The rise of rich media acceptance among publishers and consumers is driving industries like Automotive and Entertainment towards interactive advertising. Plus, the quality and cost of Web ads are going up. All of this means advertisers are seeing more value in spending online. Still, the dark shadow of AOL and the potential fallout from its expiring long term sponsorship deals continues to cloud the general outlook.
“From my perspective it doesn’t surprise me to see the results of the IAB study,” says Doug Knopper, vice president and general manager of Online Advertising Solutions at DoubleClick, “but I do think there’s a flight to quality in the ad market.”
According to Knopper, the DoubleClick data show that although there are fewer Internet publishers running ads, those that persist are running fewer house ads. That leaves room for more high quality rich media ads that command higher prices.
Over the past 12-18 months, the firm has served an average of 60 billion ads each month, and 2001-2002 year-over-year volume is stable. “We’ve reached a baseline,” assesses Knopper.
Michael Zimbalist, executive director of the Online Publisher’s Association (OPA) is quick to counteract any grim views of the Internet ad space. He forecasts more online ad spending by particular industries including Entertainment and Pharmaceuticals, and expects Automotive to “be bigger in 2003 than in the past.” Rich media ads employing technologies like Macromedia Flash and streaming media are sparking these moves.
Plus, back in August, the OPA reported that ad sales for top Web news sites like ESPN.com, NYTimes.com, Slate.com, SportingNews.com and USAToday.com shot up an average of more than 34 percent in Q2 when compared to the same period last year.
Another factor that may be overlooked in the analysis of online ad spending is content integration. Pharmaceutical firms including Pfizer have been pushing product subtly through educational “advocacy” sites that inform consumers about topics like lowering cholesterol. The FAQ-type sites stay away from heavy branding, but surely are considered part of overall online marketing strategies. This is just the sort of online ad spend that doesn’t necessarily show up in ad-seller revenue reports.
“There’s no question certain industries over the past six or nine months have increased online advertising,” states Charles Buchwalter, vp analytics for Nielsen//NetRatings.
His company’s research indicates a boost in ad revenue in the second and third quarters of this year, and predicts flat year-over-year numbers for 2002. Buchwalter “hasn’t quite been able to connect the dots” on the discrepancies between the IAB and Nielsen//NetRatings numbers; although he does note that the IAB bases its reports on survey methodology while his firm looks at ad impressions and rate cards.
“We may have to wait and see,” adds Buchwalter, who suggests that the full year-over-year reports could counterbalance what we’ve seen from the first half of the year. Either way, it’s a minor stepping stone along a path that Buchwalter indicates will lead to “big long term growth for the Internet in three to five years.”