Online Ad Revenue Decline: Implications for Google?
March 17, 2012
The digital advertising industry took a hit in the last quarter of 2011, experiencing about a six percent decline in both display and search, recently released statistics from Kantar Media, which we learned about in ClickZ’s “Spending on Digital Ads Fell Sharply in Q4.”
The optimism of the alleged economic recovery seems to be false, if the Kantar data are accurate. The firm’s numbers show display ad revenue slipped 5.9 percent compared to the same quarter in 2010, while paid search dollars took a somewhat surprising 6.4 percent downturn. Leaner spending by telecommunications providers, automobile manufacturers and businesses in the local sector as a major factor, Kantar Media reports.
But display and search were not the only ad sectors hurt by the overall economic climate. Kantar’s statistics indicate the entire ad industry suffered a one percent revenue drop compared to 2010, marking the first time a quarter’s revenue declined since the end of 2009 and dashing the hopes of many for a recovery. Perhaps this trend is motivating Yahoo to outsource advertising and Google to take steps to enhance its advertising platform.
There were some bright spots. For example, there was a solid football season, the World Series’ seven games and Fox Networks’ new vocalists’ contest The X Factor. Each helped television advertising to couch potatoes growing in the vast wasteland to expand. grow. Kantar reports network TV advertising for Q4 grew 7.7 percent.
Advertising in beleaguered consumer magazines fell 5.2 percent. Sunday magazines’ ad spending dropped 9.8 percent and local newspapers spent 3.9 percent less than last year, marking a continuation of the downward spiral the print industry has been experiencing over the last several years.
Internet ad spending in general gained only slightly with a .4 percent increase in revenue, while online display advertising lost 2.8 percent of its revenue compared to last year, and display ad spending experienced a 5.5 percent decline.
Considering the fact that the revenue streams of search engines like Bing, Yahoo! and Google are made up largely of advertising revenue, some have speculated that these declines in ad spending may push these search engines to charge its users more, shotgun out more ads in hopes of producing clicks which will encourage advertisers to spend more, or saturate a market sector for big spenders who want to reach anyone who is looking for a hotel, airplane flight, or celebrity news item..
“If true, this is bad news for those depending on online ad revenues,” said Google expert Stephen E Arnold, who maintains the site www.arnoldit.com. “If Google revenues go south, the company will take immediate and direct action to pump up revenues and sustain growth. After 13 years of trying to diversify revenue, Google is living up to Steve Ballmer’s quip that ‘Google is a one trick pony.’ The pony is aging now.”
Jonathan Tressler, March 16, 2012
Sponsored by Pandia.com
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