It was the last part of the advertising sector to fall and may be the first to recover, but online advertising is now in a recession. With the four largest Web advertising companies (Google, Yahoo, Microsoft, and AOL) having reported March quarter financials, we can get a pretty good sense of how the sector did as a whole. If you add up the online advertising revenues of these four online advertising bellwethers, the total online advertising revenues for the quarter came to $7.9 billion, a 2 percent decline from a year ago and a 7 percent decline from the fourth quarter.
The growth of online advertising has been slowing down for a while, but this is the first quarter to experience an actual decline in revenues. Given the poor performance reported by all of these companies during the quarter, this shouldn’t come as a surprise. Only Google was able to eke out any annual growth, the rest all saw online advertising revenues drop. The fact that Google’s advertising revenues represents 68 percent of the total and that it saw modest growth helped to dampen the overall decline.
On an annual basis, the revenue growth just keeps going down from 18 percent growth in the third quarter to 8 percent in the fourth to this quarter’s 2 percent dip. On a quarter-over-quarter basis, the decline is even steeper. Other than the slight 3.4 percent rebound we saw last quarter in sequential growth, which appears too have been seasonal, the sequential growth rate has been coming down for at least the past six quarters.
These numbers represent global advertising revenues, and include network revenues paid to affiliates through AdSense and Yahoo’s ad network. I’ve stripped out Google’s licensing revenues, and for the other companies include only the advertising portions of their online revenues as reported in their quarterly earnings statements. Those interested in comparing this to more official numbers should note that the IAB, which only recently came out with fourth quarter data, only measures domestic revenues for the industry.
You can see the numbers I’m using in the table below.
Online Advertising Revenues (in millions)
| 3Q07 | 4Q07 | 1Q08 | 2Q08 | 3Q08 | 4Q08 | 1Q09 | |
|---|---|---|---|---|---|---|---|
| $4,190 | $4,758 | $5,086 | $5,185 | $5,352 | r$5,504 | $5,331 | |
| Yahoo | $1,544 | $1,590 | $1,572 | $1,587 | $1,563 | $1,594 | $1,383 |
| Microsoft | $670 | $860 | $840 | $840 | $770 | $866 | $721 |
| AOL | $540 | $620 | $552 | $530 | $507 | $507 | $443 |
| Total | $6,994 | $7,828 | $8,050 | $8,142 | $8,192 | $8,467 | $7,878 |
| Sequential Growth Q/Q | 12.73% | 2.84% | 1.14% | 0.61% | 3.4% | -6.96% | |
| Annual Growth Y/Y | 18% | 8.16% | -2.10% |
Update: For everyone complaining in comments about my top chart because it doesn’t start at zero, here is another one showing the exact same data.
any guess to when the things will up again? … ?
2010
down and how! u still think goog will remain immune?
when they change the calculations and formula for generating the graph. just like the banks.
Just curious. Commercial or Investing?
tree
i think internet marketing will recover fast due to low investment. all company in the world take a bench to organize their account first (well, after sacked their workers). 3rd quarter of this year seem to be fastest realistic time that online advertising revenue will come back to normal.
This is a fantastic analysis Erick, timely, original, perceptive.
I think that the first graph is zoomed in so much on the revenue axis as to be misleading. A quick glance would not lead to the conclusion that y/y decline was 2%, or that q/q decline was 7%.
agree– most graphs start the axis at 0. starting that graph at 7500 makes it appear that ad spending fell off a cliff… here is what it looks like when you have it set to 0
http://spreadsh...xNlvfczXqCQM3UA
and not to split hairs, because I think the conclusion is right, but a recession is usually defined as two quarters in a row of negative growth, not a decline in positive growth.
Yeah, it dropped by a hefty %, but not by half like the chart indicates.
Excel created that chart like that automatically, I swear. Didn’t even realize it was a zoom-in till just now. I think it looks good, though. Helps make the point.
Your response made my head explode. That you did it by accident is one thing. It suggests incompetence, but hey, that happens. People make mistakes.
But that you stick with the misleading chart when someone points out its flaws is incomprehensible. Saying that it “helps make the point” suggests not just incompetence, but malice as well.
If you wanted to help make a useful point, you’d use a chart that help visualize the data without being misleading.
Michael – thanks! exactly right.
“I think it looks good, though. Helps make the point.”
Yikes.
yea well, what can you expect, all writers here are incompetents and tabloid jounalists at best
Michael, keep your head on. The chart is accurate. It emphasizes the change that has occurred. If it showed the same drop and the axis started at $0, then it would be inaccurate.
And if I really had any malice in presenting the chart, I wouldn’t have posted the underlying data. You don’t like my chart? Make your own, like M McMahon did.
Sounds like a democrat………..Intentionally misleading people then not doing anything once your incompetence has been pointed out.
Ryan, I added a line chart at the bottom showing the same data. You might prefer that one.
For god’s sake. You don’t get it.. do you?
Please read the chapter in the book “How to lie with statistics”
Erick,
It makes the point? What point? That revenues fell by 7% from last quarter. I disagree. The graph in the article makes the point that the decline from last quarter was about 50%. That is misrepresenting the data. If I was making a stock purchasing decision based on a graph I would want the graph to depict the situation accurately, not depict a 7% decline as a 50% decline.
lol
best erratum ever.
Oh now I see. You’re a funny man. If you’re going to be a dick about it, why even have the lines correlate with the numbers at all? I propose this version that really drives the point home: http://yfrog.com/2jpicture3fp
It’s been a pleasure frequenting your establishment.
hope soon..?
Does this mean companies will be shutting down their products soon? But Google AdSense will be there as its boasts of rich repertoire of online ads. But Bloggers will have to find some alternative ways to spice up their incomes.
It’s a very big risk to market with these companies because no matter who you are you will waste money when you start with them.
Reason why people are scared to spend money into PPC.
Looking at the numbers, MS and Google fared the best – their revenue looked more like 3Q08, while Yahoo and AOL seemed to have dropped to well before 2007 numbers
at a time the local search market is exploding? i dont think there is enough premium natural language location based local search inventory to go around. 20 million small businesses and no leading social network to call home. http://www.mark...-search-043955/
RevenueLocator.com – der’s gold in dem’ der’ hills
I’m amazed at how little AOL and Microsoft actually make with online ads. Their piece of the pie is very small.
I’m not at all surprised by these figures. LocalAdLink has severely cut into the online ad business by the Big four. Lower cost, brings the local merchant ads that advertising on Google AdWords, etc, just can’t bring them. LocalAdLink is growing by leaps and bounds while the big boys are losing ground.
more spam ehh???
Except the only problem is that most business owners with half a brain realize that localadwhatever is just another MLM scam without a real business model.
all this tells us is that nobody has found the holy grail of targeting yet since these are large ad networks that rely on targeting to product results for their advertisers. Vertical networks are thriving right now: http://www.clickz.com/3633578
quote from the article “According to a study of vertical networks — in essence subject-specific ad resellers — their collective reach has increased over the past year from 21.5 percent to over 57 percent.”
there’s no doubt that the industry as a whole is having some issues… but a lot of ad dollars are just going in a different direction towards networks that don’t make it into these big reports
Google has different issues than Yahoo/MSN/AOL. Google Q1 2009 was HIGHER than Q1 2008- lower than Q4, so it is finally following the media annual business.
Yahoo/MSN/AOl on the other hand have Q1 2009 lower than Q1 2008, and growth is on a steady and fast decline.
I too think the vertical networks like Glam, Travel Ad Network are eating the portals’ lunch and taking $$$’s from traditional media like New York Times and also gaining share. How can Verticals be growing at 50%+ while Yahoo and AOL are declining? Google makes portals useless, send traffic to the wide web, Vertical Networks sweep in and get the ad $$$’s where the users spend time and are engaged.
exactly. finally, someone that gets it
I thought to have a recession you had to have two consecutive negative quarters ?
Your figures show just one, Q1 2009.
That is for the economy and is only a rule of thumb. For online ad revenues, I get to make up my own rule of thumb
Yikes again (see Michael Belisle’s earlier comment above).
“I get to make up my own rule of thumb…”
This is a serious subject, and you did some good research and brought it to us. Good!
However, rather than making up your own rules of thumb, you should find out what the real rules are, and the experts who apply them.
That would make a better article.
I think we’re all going to miss real journalists when all of the real newspapers have gone out of business…
Bill, there are no “real rules” when it comes to calling a recession. Economic recessions are called after the fact by groups of economists who look at a variety of data. A recession in a particular industry is generally considered to be a decline in growth. I think this counts.
And btw, I’ve been a “real” journalist for 15 years, thank you very much.
Hardly the end of the world. I would not call it an ad recession…hyperbole. Compared with other industries not too bad.
As a publisher I would say some revenues are down a bit..especially from likes of Google Adsense. However, display ads are thriving in our sector. Sweetening the pill a bit with takeovers etc but no lack of interest and bookings. I expect things to pickup next year but the impact of the wider recession has so far been pretty limited for us in terms of ad revenue.
Excuse me but, if a graph lies to your eyes, what is the point of putting it to there?
It is amazing to see that some people still uses graphs starting from an arbitrary points like “7500″ instead of zero to give it more “dramatic” effect.
Please either remove the first graph, or make y axis start from zero or put something that says it is only to made to give a false dramatic effect on figures.
It’s not misleading, it’s a common way to do it. TC readers should be able to handle it.
It is a very common wrong way to do it.
To see how misleading it is, change the baseline to 7800, shouldn’t be a problem since author arbitrarily selected it anyway.
This is not a rapidly changing financial data where focusing to previous delta is meaningful. Using only second graph would be sufficient and correct.
I actually didn’t do that on purpose. Excel automatically generated that chart when I picked the column chart style I wanted. Or maybe I wasn’t paying attention.
Here’s a novel idea: Fix it.
Not sure why everyone’s getting their panties in a twist over where the baseline is. Does every graph need to start at zero? You rarely see baselines start at zero because that could be a way to mislead just as well. Should this one start at zero?: http://finance.....com/echarts?s=^DJI#chart1:symbol=^dji;range=6m;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
I rarely see
It is obvious that rapidly fluctuating data in finance applications where changes are usually so little in absolute terms, there is a need to zoom in to changes to make them visible, because very small changes matter a lot.
And obviously this is not such a case. The graphs mentioned in this case does not mean anything, they are just misleading nonsense.
You know, that might be a good comparison, and perhaps now I get what Eric was trying to communicate by offering a line graph instead of a bar chart: nobody expects the axes on a line to start from zero. A bar graph, however, should, because that’s what the bars imply.
So perhaps the actual problem with plotting this data is that it’s just 5 numbers. It’s not a very interesting plot. The chart consumes 57,000 pixels for every one data point.
You aren’t seasonally adjusting? Nov – Dec are clearly going to be bigger months than Jan – Mar. I bet this is well known in offline advertising, but has been swamped by overall growth in online ads.
Thanks for that post. I was wondering when the recession would hit online advertising
Ad income to decreasing like crazy ..
Now is the time to build a product ! go folks !
The situation is so bad that it’s virtually impossible to get a quote for a campaign I’m doing.
At Hydra we are seeing tremendous growth. The difference is that advertisers are demanding more accountability and better ROI. Cost Per Action is growing exponentially because there is so much available “space” on the internet that marketers want proof that there ad is working. CPA is all about proof and ROI. This area of online advertising is growing quite well. In fact, I think it’s fair to say it’s taking market share dollars rom offline media.
“It was the last part of the advertising sector to fall and may be the first to recover, but online advertising is now in a recession.”
“a 2 percent decline from a year ago and a 7 percent decline from the fourth quarter.”
Sensationalizing much, TechCrunch? Puuh-lez
Do you guys always distort your graphs like in the first one?
Online advertising is receiving a lot of bad press lately about its effectiveness. The reality is the number of places to advertise has increased dramatically in the last 24 months. Giving a supply-demand ratio, it is only normal the competitiveness has driven ad costs down. This will only be followed by an increase in online advertising useage. This will drive the demand back up.
Marketing is not what generates a sale or closes the sale. Marketing in any business is to attract a potential customer.
Try Pay Per Click Ads with FreeKii.com, receive $5 Ad Credit With Account Activation.
Pay Per Click Ads with FreeKii.com served over 40 million ads in 2008.
You should be writing for The Sun in the UK, you’d be at home there
No difficult times last forever. This economic downturn, though it may affecting online advertising, won’t last forever. We’ll survive.
um, seriously now: a 2% drop in Qtrly revenue from a year ago is not that big a deal.
display ads suck (& have for awhile), but otherwise we’re doing fine. Q2 is likely already in recovery.
especially if you’re a startup, there’s really nothing to see here — the long-term growth trend of online advertising & e-commerce is still going to be trending up, and it’s a huge fucking market.
the sky is NOT falling. stop whining, & get your asses back to work.
Dave. Thanks for putting things into perspective!
,l,,lmlm,lml
Dave, it is not the 2% drop that is alarming, it is the magnitude of the change from an 18% growth rate only two quarters ago. That is a 20% delta in two quarters. Hopefully, that is as low as it goes and we get back to growth.
But there definitely is something to see here. If you think there is not, I have a bucket of sand you can stick your head in.
Uh, what’s up with the last chart? It claims to be fixed but the axes are exactly the same as the first chart; only difference is that it’s a line instead of bars.
One reason that your chart is upsetting people is that it shows up as a thumbnail on the front page of the site, where the axis labels are not visible due to the downscaling. Your refusal to fix it is trashy behavior for someone who claims to be a journalist.
I was similarly confused by the “fixed” chart.
But Erick’s replies to the comments are hilarious, and puts it all in context.
Thanks for the entertainment.
As we’ve seen in the past, I can only guess that 1Q11 will be similar to 1Q08 – Guessing it will start rising in the first Q of 2010 and will get stabled and showing same stats as we all liked before.
Amen.
What’s interesting is that Google is the only company of the four that appears to be growing at all for the last six quarters. Clearly, growth in online advertising doesn’t have any effect on MS, Yahoo or AOL. I wonder that says about the rationale of a MS/Yahoo deal.
there is always a huge dip from Q4 to Q1 – its called Christmas. you cant compare Q4 to Q1.
and a 2% decline from Q108 to Q109 is a recession?
There was a post here http://www.lawm...dit-Crunch.aspx about the credit crunch hit online i think this trend will go away soon as long as the media stop the panicking
The fact that the linking picture is still of that biased – misrepresentation of the facts is… sad. Seriously what does TechCrunch have against online advertising? You have some track record as of late for unfair bashing. A little balance please.
With Love,
Matt
for adsense publisher like us it is not bad that Google had a small increase in revenue comparing with 1q2008. But the publishers sure are receiving less
I missed last months ad revenue by $14 dollars this month not to bad But I hope it doesn’t get any worse
http://www.googlemenews.com
So should CPC fall down for my Google-Adwords then?
Haven’t seen any change yet in average CPC….
2% decline is Q1 in the worst economy on record is not that bad.
But the dramatic-looking graph makes for a better eye-catcher.
This would have happened eventually, with or without a recession. The idea that success is measured by growth is silly.
redone chart is exactly as stupid as the first one.
Erick, while no one thinks that online is crushing it, your picture only tells the story of four companies. With audience fragmentation at an all timee high, there are literally hundreds of thousands of sites grabbing ad dolars these days, and the big four losses are offset by dollars being shifted to hundreds of ad networks and to the many thousands of sites the represent. After talking directly with hundreds of start-up and mainstream property CEOs, I’d say it’s flat overall, with the long tail/networks taking share from the not just the big four but also many well-established sites.
Maybe. I can only chart numbers from public companies that report numbers. And with about $8 billion in quarterly ad revenues, the top 4 represent as much as half of all global ad online ad spend. So I think they are a good proxy, unless there is a divergence happening like you are saying there is, with the ad networks capturing a larger share and growing more.
Point me to some hard data I can rely on and I will include it in an update.
I think Richard J is on the right path here. Jeffrey Rayport said the big 4 account for 90% in his recent BusinessWeek article. That seems a bit high to me but it’s somewhere between 50%-90%.
Our company (Spiceworks) sells ads directly for our property and we’ve been doing so for 2 1/2 years. We’ve seen ad revenues increase significantly every quarter through the ‘recession’. We’re a rounding error compared to the big 4 but the $ start to add up.
I can’t share our hard data but for a proxy I’d look at TechCrunch’s revenues now that you’ve taken the smart step to sell directly as well. You’ll first get a bigger cut as you eliminate the middleman. More importantly you’ll be working with advertisers directly so you’ll be able to explain your audience much better… and then you’ll start innovating with them and creating new ’solutions’ for them. As you grow, you’ll be eating into the Big 4’s revenues as well.
I’m with you — there is a ‘recession’ going on here but there are a lot of bright spots and innovation in the long tail.
This is absolutely TERRIBLE reporting by Erick.
I completely agree with Michael Belisle on this.
TechCrunch must IMMEDIATELY correct the chart as a lot of advertisers are READING TechCrunch (unfortunately) and writing such stuff creates a “herd mentality” of some advertisers automatically decreasing spends online BECAUSE “there is a recession”. On first glance, I almost fell of my chair seeing a 50% drop…and to find eventually that the vertical axis is being “zoomed” to “make a point” is terribly frustrating.
As some suggested maybe it is the case that growth is coming from somewhere other than the big 4 measured here. We have been observing a migration of ad spend to performance-based online media as a whole, and more specifically in our case, as a cpa ad network, we’re currently up about 50% over last year. So maybe it’s time to start taking a more holistic look at online ad spending.
@All
Do you click on online advertising?
Probably not.
So who clicks on online advertising?
Who?
To be honest, i can not understand how for the first graph, you made a mistake in not starting with zero. A mistake like that, you should not publish it on your website.