Nielsen Online: Four Mortgage Companies Reduce Online Ad Spending

Is the real estate collapse finally taking its toll on online mortgage ads? It appears so, based on January ad-spending figures among top Internet advertisers compiled by Nielsen Online's AdRelevance service.

Troubled mortgage lender Countrywide Financial Corp., for instance, cut spending to $13.4 million last month from $38.3 million in December, according to Nielsen, whose data includes CPM-based advertising but not search, e-mail or cost-per-click buys. In November, online spending by Countrywide had reached $57.6 million.

Not all of the big mortgage-related advertisers were down. Comparison shopping site NexTag, which also provides mortgage leads, increased its online ad spend by $4.5 million to $65.5 in January. As such, it remained the number one online advertiser. Experian Group Ltd., which owns competing mortgage lead-gen site, meanwhile, doubled its ad dollars last month to $61 million.

But others have fallen off Nielsen's top ten list of advertisers altogether. LowRateSource--which had been a leading online marketer in 2007, and spent about $25 million on online ads in both November and December--didn't make the list in January. Apollo Group, which owns the University of Phoenix adult education service, was the number 10 advertiser at $12.6 million.



Credit report service Privacy Matters, which had also figured periodically in the top ten last year, has also been absent from the top rank.

Including HSBC, only three of the top ten online advertisers in January were mortgage-related marketers, compared to five in November. Total online spending among the top mortgage advertisers dropped by about $12 million to $140 million in January. That's lower than it's been since at least last June. In another sign of recent ad softness, consumer financial site Bankrate earlier this month missed fourth-quarter earnings expectations because of cancelled ad bookings caused by turmoil in the mortgage and financial sectors.

Last September, Oppenheimer & Co. lowered its estimate for the Internet ad sector in 2008 by $447 million to $25.3 million because of expected cutbacks in mortgage-related ad spending. Of the $2.7 billion in financial services spending online, about $900 million comes from mortgage ads.

"We had mentioned that roughly $300 million of that would be at risk, and since then things have only gotten worse," said Oppenheimer analyst Sandeep Aggarwal. "So maybe more than $300 million is at risk in '08."

In testimony before Congress last week, Federal Reserve Chairman Ben Bernanke conceded that the outlook had worsened in recent months as the mortgage mess and credit crisis rippled through the wider economy. He said the deteriorating economic conditions could necessitate another rate cut. The Fed's benchmark interest rate has fallen to 3% from as high as 5.25% last summer through a series of cuts since September.

Aggarwal suggested renewed refinancing activity in the last month resulting from the rate cuts could help boost online ads. "I would note that some of the [ad] weakness could be offset by increasing re-financing activity," Aggarwal said. A 30-year fixed-rate mortgage is now about 5.8%, down from 6.75% six months ago.

Countrywide, which is being acquired by Bank of America, last week reported a 5% increase in loan refinancings. But that gain failed to offset a 24.5% decline in loan purchasing activity.

The mortgage's industry's online spending has remained as high as it has because of the low cost and high ROI of its flashy banner ads, according to Aggarwal. Mortgage companies spent almost $409 million on advertising during the third quarter of 2007--higher than the total during the peak of the housing book, according to TNS Media Intelligence data cited in The New York Times Monday.

But the research firm has not yet made available fourth-quarter ad figures that might show a decline from that level.

Looking ahead, a recent online ad forecast by technology research firm Yankee Group predicted that low-CPM banners, symbolized by LowerMyBills' ubiquitous "dancing cowboy" animated ads, would continue to drive much of the ad growth in 2008. But, as with Oppenheimer's online ad projection, forecasts can be revised downward based on changing conditions.

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