We all know online advertising decelerated in the third quarter, but how bad was the slowdown overall? To find out, we added up the online advertising revenues for Google, Yahoo, Microsoft, and AOL, which together account for the majority of online advertising. In the third quarter, growth pretty much ground to a halt. The combined ad revenues of those four Web bellwethers eked out only 0.6 percent growth, quarter over quarter. That sequential growth rate was 12.7 percent in the fourth quarter of 2007, to 2.8 percent in the first quarter of 2008, and 1.1 percent in the second quarter (see chart above).
On an absolute basis, the combined ad revenues for all four companies during the third quarter increased by only $50 million to $8.2 billion. The year-over-year growth rate was still a healthy 18 percent, but those comparisons will likely flatten out as well starting in the fourth quarter.
For the purposes of this analysis, I took the total advertising revenues from both Google and Yahoo, including their network revenues paid to affiliates, the online revenues reported by Microsoft, and only the advertising portion of AOL’s revenues. There were other companies I could have added, but these four serve as good proxy for the overall online advertising market. Below are the absolute revenue numbers, broken down by company:
See all
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sad. but understood.
The graph looks bad, but it is a change in percentage and hence looks big. The actual numbers have gone down, but not by a hue margin..
Dont be too sad, its ok to be gloomy..
Sorry teraom. Normally I’d say graphs like this are misleading but still - the fact is from Q4 ‘07 to Q1 ‘08 growth dropped from 12% to 2%. That’s BAD.
Keep in mind this might also explain why MS is no longer that interested in Yahoo for search (which would have been used for advertising). If the glass ceiling for online ads has essentially been reached there’s no point in going crazy at this point to try and geta larger piece of the pie.
I think over the next couple of years online ads will start to actually decrease all over because as the younger generation starts moving into decision making roles they’ll be more savvy to “SEO” crap and won’t tolerate the shady practices Google does to inflate the costs of advertising online.
Scott C,
I don’t find younger people to be any more savvy about SEO than are my parents. On top of that, young people are more susceptible to advertising than anyone else. Online advertising will be just fine.
Erick, there is one important point you missed. All the above mentioned companies publish their figures in USD. But they all have significant revenue streams from other countries and in other currencies. The USD won extremelly against all major currencies (about 20% in the past 6 months against the EUR and a lot more against the pound sterling). This is a major reason the above mentioned companies made less USD revenue!
Agree with Andre, below is a link to a graph of the US dollar increased in value significantly against the Euro in the last six months.
http://www.x-rates.com/d/EUR/USD/graph120.html
So how much of the revenue flattening is due to exchange rate fluctuations and how to much to reduced ad spending in the USA? Can’t tell with out #s that split out revenue from Europe. One other point. The dollar has actually fallen substantially against the Yen in the same period.
http://www.x-rates.com/d/JPY/EUR/graph120.html
The dollar is not uniformly going up against all currencies during this period. As such, the effects of exchange rate fluctuations are mitigated by a netting effect.
Bottom line: online ad revenue in the US is almost assuredly flat or very close to it at this point.
It should be negative. Seems like there are companies out there that have a lot of money to advertise. The general of the economy is that growth is down, yet these online adv companies are having growth.
yep. sad bu true rite
I suggest you to produce a compilation post on the networks, who have witnessed an increase in their revenue figures due to this recession i.e. Linkedin and others, if any.
Never lose hope, because it may accelerate/move up once the economy is up.
That will happen like in years. The advertising will decrease to a normal level in terms of prices. And when that happens, the revenues will have a good or bad trend based on the innovation.
You should review the G1 Google Android app Pictorial. It lets you
A. snap a pic on your G1
B. Upload it to Picasa
C. tag it
D. Automatically adds your Geolocation to the pic based on your immediate location
E. Lets you organize your pics into folders on the phone
Advertising on the internet is going to fail soon because of
A. https://addons.mozilla.org/en-US/firefox/addon/1865
B. The incarnation of A on Android
C. The incarnation of A on iPhone
You can’t stop this technology and it is VERY popular
Another thing about Mobile is that apps like the MySpace mobile app don’t dare advertise. There isn’t enough screen real estate to do it anyway. I can only speak for the G1 MySpace Android app, but you can use myspace faster than with a browser on 3g and NO adverts.
I don’t think it will be very long before Adblock plus has it’s Android and iPhone incarnations then you will start seeing massive negative growth on the Web 3.0 mobile side. Apple may block it from the store, but as long as you pay the $25 developer fee, I doubt Google will block it.
Yes adblockplus is totally awesome and I really hope that it does bring the oh-so-intrusive online ad industry to its knees. It’s amazing how repulsive many pages look without it! ABP is THE plugin for Firefox!!!
1) ABP has been around for years and hasn’t made a dent in online advertising revenue and it won’t in the future. It’s a geek only tool.
2) An app that lets you tag and upload photos to on online album is cause internet advertising to fail? Lay off the crack pipe pal.
Here’s another thing to consider: if advertising on the internet fails, so do all those free advertising supported services you love to use.
In my coutry, Google Adsense is the best advertiser.
Seriously? Where are you? Adsense has done virtually NOTHING for my blogs. I’ve been making more money using ad services over the course of a month than I have made in the last six on Adsense!
BTW, I am leaving my new Picasa pic folder in my name link.
I’m pretty sure than when the 2009 Q2 recovery comes about, we will see advertising revenue slowly leave the picture, and we’ll start to see web 1.0 membership style monetization take center stage on mobile. We are already starting to see that now.
The great advantage we have is that the poorer countries looking to pick up scraps do not yet have the G1 or the iPhone, so we can still make applications and charge for them without worrying about scrap taker free versions.
Chris, I’m sorry bro, but you’re not living in any sort of reality. And ad-blocker! Jesus bro, that’s stupidest shit I’ve ever heard–it’s never going to make a dent in anything. Nobody is worried about that. 2009 Q2 recovery!? Web 3.0 Mobile Side–do you even know what Web 3.0 is meant to be about? …Chris, you’re not as informed as you think you are. Get your shit together!
The semantic web. Information free from context. Mobile content delivery and geotagging everything.
addons.mozilla.org/en-US/firefox/addon/1865
449,378 weekly downloads
28,951,938 total downloads
Mulitply that number by the 10 page view per day with 5 advertisements on each page.
50 adverts per day per download.
18,250 adverts blocked per year per download of adblocker plus
28,951,938 * 18,250 = 528,372,868,500
About 530 billion adverts are blocked yearly at the current usage rate.
That rate is increasing at 500 million new users per month.
530B CPM at $0.10 CPM is $52,837,286,850
Roughtly $52 billion dollars USD and climbing is missing from the global advertising revenue stream because of Adblocker plus.
$0.10 CPM figure taken from MySpace reported CPM rates, which are LOW for the industry.
http://techdirt.com/articles/2.....9243.shtml
“Advertisers understand that a lot of the page views are redundant, thus explaining why they’re not will to pay too much for ad impressions — giving MySpace a reported 10-cent average CPM.”
So 52 Billion dollars are being removed from the global revenue stream for ONLINE content. Once the embodiments of ABP are implemented on mobile that will kill the rev sharing dynamic because the projected expansion into the mobile world will prove to be as futile for ad revenue as the existing web.
In a blaze of glory entrepreneurs will realize that Web 1.0 was actually a good idea, and they will start charging for services again, except this time on mobile G1 and iPhones.
Another Silicon Valley bubble will form and explode.
Life goes on.
The End.
should be
“Mulitply that number by the 10 page views per day with 5 advertisements on each page.”
should be
“That rate is increasing at 500 thousand new users per week.”
edited.
most people browse far more than 10 pages per day with 5 adverts on each page, and most CPM is above $0.10 so I was REALLY conservative with this barring my typos which were edited.
I hope this makes it abundantly clear.
I also didn’t take CPM /1000 into account so recount the 53B as 53M.
That’s still way lower than reality. In reality it would be more like 30 pages with 10 ads per page, so
53M *3*2
like 300M+ in lost ad rev at the very least. People download the plugin off of Mozillas site as well.
And there’s no way to stop it or get the rev back or bypass it.
Chris,
Those download numbers are meaningless. I have ABP installed and not turned on. I download it every time there’s an update. And those numbers aren’t lost revenue for anyone; ABP doesn’t download the ads, so they don’t count as impressions anywhere. Like that other guy said, get your shit together; personally I’d suggest laying off the bong.
Crispy,
most people that download ABP use it, and even though ABP doesn’t download ads, it’s still 300M-1B in lost ad revenue because those people WOULD HAVE downloaded the ads and had a chance to view and click on them had they not had ABP installed.
People that download ABP and don’t have it turned on comprise almost none of the user base.
I also agree with Andrew’s point of view
Google looks as strong as ever. Everyone else is dying.
“duplz”,
I believe his name is Andre and not Andrew, but he’s wrong.
http://investor.google.com/rel.....nings.html
“International Revenues - Revenues from outside of the United States totaled $2.85 billion, representing 51% of total revenues in the third quarter of 2008, compared to 48% in the third quarter of 2007 and 52% in the second quarter of 2008. Had foreign exchange rates remained constant from the second quarter of 2008 through the third quarter of 2008, our revenues in the third quarter of 2008 would have been $59 million higher.”
This is an EXTREMELY negligible amount for Google and in relation to Erick’s graph showing the big picture of the top of the internet advertising bell curve.
These companies have to set up local companies in these countries, which have their own numbers, and their own operating costs ect.. in that currency.
They can keep the money in the foreign currency indefinitely. The fact that they traded it for USD even though they got a crappy exchange rate means that they think the US economy is going to bounce back in Q2 of 09. Otherwise they would have kept it in X country and bit the tax bullet of the Canadians, and European socialist gun.
it may have stagnated, but one enormous positive is that to date it has not decreased. There has been a net loss in other advertising mediums revenue over the same period including magazine, TV & radio according to TNS … http://www.tns-mi.com/news/09242008.htm
Would be better to show quarterly growth vs. same quarter YA to account for seasonality - Q4 tends to be strong and Q3 weaker . .
Isn’t it good ? I mean when finance, auto, export-n-import, all of them are getting burnt bad, some of them closing down and some on the verge, online advertising is above the green mark.
May be in the coming days it might just happen to slip into the red, but we can be assured that when the economy picks up pace or just stabilizes, Online advertising will be one of the first to resurrect.
“To date it has not decreased.”
We are just entering a catastrophic consumer spending crisis following an earlier financial meltdown and ad spending has already flattened. That should give you some idea of the likelihood of it not decreasing.
d galbraith is extremely correct. This is going to be a black christmas for all.
Nice post Erick; using these companies as a proxy for overall ad spending is very resourceful and insightful. I wonder though if there isn’t also a flight to size, which is common in a recession, such that small publishers suffer more than large publishers. If this were the case, your conclusions would be even more dire.
I also agree with other commenters that Google belongs in its own category because of its text ads. So much of Web 2.0 has been based on display ads, when it seems that, short of MySpace-level carpet-bombing, relatively fewer publishers have been able to get them to pay. Excluding Google, there has been a 4% quarter over quarter decline in advertising spending at AOL, Yahoo and Microsoft.
The idea is meant to be that smaller publishers and smaller ad networks should be doing better than bigger networks. That’s the whole long-tail shtick. Whether it’s true or not I’m not sure, but the idea is simply this: advancing technology allows for smaller companies to address the needs of a microcosmic niche better than larger companies. E.g. an ad network just for music-related publishers delivers higher advertising value and ROI than google would in the same niche. Therefore, the hope is that companies are getting smart and learning how to allocate their advertising budgets to various new media Web 2.0 ad networks. AND THEREFORE, HOPEFULLY THE SAME STATISTICS SHOWN HERE ARE NOT AS “DIRE” FOR SMALLER PUBLISHERS AND AD NETWORKS, ETC!
Moreover, the hope we all must have has ahead of the curve technologists is that large companies with large spending budgets are wisening up and trying to figure out how else they can get their needs at cheaper costs. The quest they are seriously asking now is: “WHERE CAN I GET THE MOST VALUE?” …Before they weren’t as forced to do so and might have just gone with the quickest and easiest route–e.g. Google Adwords. Now that same company might be willing to spend some money on in-game flash advertisements from Mochi, or whatever.
So the bottom line is get me those statistics for the long-tail of ad networks and publishers! I bet they’re not as bad as this. Right now we have an opportunity to connect with major spenders and scoop up some of their budgets. They might need the extra push. They might need us to come knocking on their door!!! But they’re going to be a lot more willing to hear we have to say now than ever! It’s up to YOU TO MAKE THIS A MONEY-MAKING OPPORTUNITY. Technology is only growing for eternity–it’s up and up from here. You’re a moron if you can’t make something happen out of this.
I couldn’t agree more. Thank you for your comment on this post. I needed to hear exactly what you said.
Scilla Andreen
CEO IndieFlix
This is not only as a result of the credit crunch or slowing down economy but they is also the revenue sharing effect brought on by the blogosphere and booming numbers of blogs and bloggers but also revenues to blogs have declined shapely in my experience, read more here: http://www.nichea.info/2008/10.....s-too.html
hmmm…
We are busier than ever our clients are being even more proactive.
Why is this happening to others
It must be their limited business model of the consultants or strapped in-house marketing teams used by the others.
Let us admit now that the whole Global economy is in a mess because of the US credit crunch, Oh God! Thanks to Mr. Bush: http://www.nichea.info
Look at what happened to the Canadian dollar
http://finance.yahoo.com/curre.....1&t=2y
Here is a play by play.
Europeans: Oh my, those Canucks, they really have their stuff together, let’s buy the Canadian dollar!!!
Oh noes, you mean that everything in Canada is exported to the USA??
And that their goods are crappier and more expensive? How could this be?
Are you trying to tell me that America owns Tim Hortons, and The Hudson Bay company?
People do such little research, and they go on hot news. All those people stuck with Canadian currency are now burning red just like people that didn’t sell on wall street.
Anybody that thinks that the CAD or Euro are worth more than the USD need simple spend money on a plane ticket to Montreal, or Zurich. Get off the plane and look around. Or look around from the plane.
This is not the US’s fault. These economies can not stand on their own. The average Canadian or European can not even afford an iPhone or gPhone and yet here in CA everybody has a really nice mobile.
Even in this credit crunch, we have so much more spending power than our counterparts.
Europe and especially Canada are not self-reliant like the US is. That’s why.
should be “Anybody that thinks that the CAD or Euro are worth more than the USD need to simply spend money on a plane ticket to Montreal, or Zurich.”
Thanks for that deep and enlightening analysis “Chris”. The Canadian dollar went down as commodity prices began to decline. Canada is a net exporter of oil / natural gas / uranium etc.
While you are correct in that the US is the largest trading partner with Canada, the USA is equally dependent on Canada’s resources for prosperity, do some research on where the majority of oil comes from in the USA.
“The average Canadian or European can not even afford an iPhone or gPhone and yet here in CA everybody has a really nice mobile.”
No, they use paper cups and string for wireless communication in
Europe. Nokia is a big facilitator in this area.
As the director of business development for a smaller online vertical advertising network (http://www.backtalkmedia.com) I would agree that the online advertising industry as a whole has definitely decreased in the recent quarters. However, at least from my experience, premium vertical ad networks, such as BackTalk Media, with a variable cost structure and reliable outsourced technology solutions are still growing strongly, just not as dramatically. By leveraging our reach across multiple digital media platforms, advertisers can deliver powerful, efficient consumer centric engagements between their brands and their customers.
It would be interesting to interview a few medium sized websites to see how the value of their pageviews and their monthly payouts have been effected. Are niche websites, like TechCrunch.com, safe from the decline in online ad spending or are niche websites more protected and can ride out the storm?
Great Article,
Wade
“More than 60% of companies are planning to increase their PPC or SEO budgets in 2009″ Linus Gregoriadis - E-consultancy, SMX London, two weeks ago…
Erick,
Good numbers… it’d also be great to see ad spending quarter by quarter broken down by online vs. “traditional” media to really understand the dynamics at play here. Of course overall ad spending growth is stagnating due to the economy, but is ad spending being shifted online by buyers away from traditional media? That is THE important trend to track here..
We know who made this economic mess? Why are they getting paid billions now?
Billions of dollars are paid in bonuses and bailouts to the “wonder boys” on Wall Street. Precisely what have these self-proclaimed Masters of the Universe been doing for billion dollar year-end paydays?
Yesterday we found out.
In recent years “the brightest and best” have perfected the rule-making governing the manipulation of ‘free’ markets and the institutionalization of fraudulent financial instruments and business models.
What still mystifies me is this: What have these heirs of Ozymandias done in 2008 to merit this self-enrichment? More manipulation and more fraud for more ill-gotten gains, I suppose.
What can done for the benefit of the human community to put right this massive wrongdoing?
Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001
http://sustainabilityscience.o.....entid=1176
to the commenter that wondered about what web 3.0 is go here and click on geo-tagged pics. I did these with android pictorail while running errands
http://tinyurl.com/cwebshare
this and semantic web are web 3.0
click on more info on the 2 in the geo-tagged folder
Google is the clear winner over this period with 28% growth. Google is still growing (3%) in the last quarter while all the others are falling. This looks like evidence of advertisers concentrating on the most successful ad platform
It must be their limited business model of the consultants or strapped in-house marketing teams used by the others…..
i believe google has always been on a up trend. recession what?
I think we’ve seen the peak of online advertising. During the summer in my opinion is when advertising really became popular. However i don’t believe that it will go down.
VERY deceptive — as we ALL know, Q4 is 45-50% of all online media action. Slowing growth - yes - stopping / NO WAY.
Recent Morgan Stanley report showing that only 5 of Ad Age Top 20 Brand advertisers, spend at industry average of 8% ish … this bodes VERY well for increase in online spending as this medium paces to match its 30% of time spent as a medium by consumers!!!
bummmer… how would you monetize this site then? http://www.rawhidenation.com ?
The upside is that online advertising has a lot of ad share to gain, as compared to more traditional forms of advertising, including TV, newspapers, and direct mail. It constitutes a fraction of the overall advertising sector, and I predict that the online advertising industry will enjoy continued and sustained growth because ROI can be directly and intelligently measured and tracked online.
In particular, I think advertising on sites like blogs and other microsites has potential.
Translation: Despite a down market and failing economy, third quarter advertising is up 18% over the same quarter last year and has not experienced one negative or flat quarter this year.
life goes on, there is more to life than spending money on ads.
This is the most astonishingly useless analysis of advertising I’ve ever seen.
First of all, as Liza mentioned above, there is tremendous seasonality in advertising revenues. The fourth calendar quarter includes the holidays, traditionally the heaviest period of ad spending during the year. So comparing 1Q08 to 4Q07 is just meaningless. The analysis is to compare growth in the same quarter from 07 to 08. If you do it this way, % growth from 3Q07 to 3Q08 is 8192/6944 - 1 = 17.9%. Does that seem like meager growth to you? Was online ad revenue relatively flat for these companies from 1Q07 through 3Q07?
Second of all, 2008 was an anomalous year for advertising for a number of reasons. This most likely indicates that online ad revenues were inflated in 2008 relative to the “baseline” growth trend, as we had a presidential campaign and an Olympics, which are hugely positive factors for all forms of advertising.
Next, this analysis assumes the four companies profiled here have a relatively static share of the overall pie. While Google’s share is likely increasing, the others are probably shrinking. But with all of the new online ad networks launched in the past two years, is it possible that the fastest-growing segments are not represented here?
Finally, not even looking at two full years of data indicates nothing about the long-term trend. If you had done the same analysis in 2001/2002, it would have looked like the end of the world. Instead, online advertising is back in a far more profitable form. Unless you’re a hedge fund manager betting on Google’s next quarter of earnings, this type of play-by-play analysis doesn’t tell you much.
Who of you clicks on online ads ?
Who ?
Anyone ?
The Natural Born Clickers do click but that aren’t those who advertisers want.
I myself at Be2.net have not seen an increase. Actually, I am seeing drastic decreases day after day. CPM rates have gone down and Google is not paying as much as they used to. Forget about Yahoo…
Doom and Gloom thats all thats been spoken about in these posts and if you keep Doom and Glooming it we will carry on getting Doomier and Gloomier…
What ever hapened to the fight in the human species, yes the World has had a major glich finacially due to a greedy few but we all know that and the world is slowly responding, what we have to do I feel as an optimistic human being is to clench our teeths and to advertise, if we dont advertise were not seen, if were not seen we dont sale, if we dont sale we start to lay people off, we lay people off more doom and gloom… A viscious circle, we have to take the bit (the credit crunch) between our teeth bite down hard and run with it, if we let it get the better of us, which it is doing on a global scale we are all doomed and gloomed…
Come on guys when the going gets tough the tough get going, pull yer finger out of your bottoms and lets all put a bit of confidence back into the market.
Raise the confidence the banks will stop shitting themselves and we might be able to kick start this economy again, stay negative and the bank with clench their cheeks until their coffers are full and then start charging us the Earth to get money out of them.
Power to the optimists ! Doom and Gloom to the Pessimists !
Bainzy.
I hope it will increase in the coming months.
We should be glad that it’s not any worse considering how bad our economy is.
Follow Google on Line Spout. http://www.linespout.com?q=google
Good thing that in general the online ads market is still growing…Like our http://www.HappyTutors.com, we continue to sell our ads space, although it’s small, as long as you are on the nitch market, you still have potential in a long run:-)
HappyTutors.com
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