• by Gavin O'Malley , November 6, 2008

Next year will be the first year since the start of the century in which some components of interactive advertising will show little or no growth, according to a 2009 outlook report from Borrell Associates.

Some segments are even expected to experience measurable decline, the study predicts. These changes are not seen as cyclical by Borrell--and show no sign of improving during forthcoming years, regardless of upward movement in the nation's economy.

"No form of advertising yet invented has grown forever," the report states. "Interactive ad spending is no different."

The downward trend of some interactive ad formats has been hurried along by a massive economic downturn, according to Borrell.

Borrell's initial 2008 projections called for little overall change, or a 2% drop in U.S. ad spending, compared with 2007 estimates. The recast projection, developed from trends apparent now, is much more severe.

Indeed, Borrell projects a 9% decline in "offline" ad sales partially mediated by continued growth for interactive ads, but still resulting in an overall drop of more than 7%.

Overall changes in interactive spending in the recast projection are dramatic--a drop of one dollar in every seven. But the changes are not evenly spread across the board.

Standard format ads have been downgraded 9%, although the local portion is up 11%. Instead of the growth originally foreseen, total e-mail marketing declines by 18%.

Paid search, meanwhile, is off by 17%, despite 18% growth in local paid search. Spending for streaming audio/video is up 5% because of strong local performance.

Offline media suffers the most in the recast projection. Newspapers lose more than 10%. Cable is reduced by nearly one dollar out of every 10--all the more dismal, considering this year's national elections. Broadcast television shows less change from original projections, but it was already forecast to drop more than 7%.

Spending by local advertisers--which has grown at a frenetic 47% this year--is expected to diminish to a paltry 7.8% in 2009.

Borrell also identifies an overarching trend in marketing spending, which encompasses most of the world, away from ad spending and toward promotions.

"We have seen the end to the economic cycle effect" on traditional advertising, Group M Futures Director Adam Smith is quoted in the report as saying. "So once money has moved into marketing services (from advertising media), it tends to stay there."

Roughly 50 cents of every marketing dollar spent in the nation today is directed to promotions, while only 35 cents of that same dollar goes to advertising, according to Borrell.

Online promotions are, for the most part, Web site-centric. As ad budgets contract, more emphasis will be placed on these homegrown marketing tools to bring in business. Contests, games, coupons, discounts, promotional downloads, loyalty programs--all will play a part as businesses large and small attempt to leverage visits to their Web sites into sales more efficiently.