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Archive for Wednesday, October 21, 2009

Internet advertising begins comeback

October 21, 2009

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— After bogging down in the recession, Internet advertising is regaining the momentum that has made it the decade’s most disruptive marketing machine.

The signs of an online revival are emerging even while advertising in print and broadcasts remain in a slump that has triggered mass layoffs, pay cuts and other upheaval.

Internet advertising was just about the only bright spot in the third-quarter reports of two major newspaper publishers, Gannett Co. and McClatchy Co. Meanwhile the companies still are dealing with steep declines in print ads — an imbalance most analysts predict will take years to address.

The harsh reality is that much of the advertising in long-established media, particularly in the classified sections of newspapers, will never rebound to pre-recession levels, said Lauren Rich Fine, a longtime media analyst who is now a professor at Kent State University.

That grim outlook contrasts with the fact that advertisers are increasingly allocating more of their budgets to the Web. That’s where their customers are spending more of their free time. On top of that, Internet ad rates are less expensive, and the returns on online ad investments are easier to quantify.

Even when they buy time in other media, advertisers are realizing they need to be promoting their wares on the Internet too.

“You can draw a straight line from the time when people hear an ad on the radio or television to when they search for that company on the Internet,” said David Karnstedt, chief executive of Efficient Frontier, which helps manage ad campaigns on search engines.

These trends will give Internet advertising 19 percent, or nearly $87 billion, of the worldwide ad market in 2013, up from just 4 percent, or about $18 billion, in 2004, according to PricewaterhouseCoopers and Wilkofsky Gruen Associates.

That would make the Internet the third-largest marketing medium. Television is expected to remain on top, with $168 billion, or 36 percent of the global ad market in 2013, up from 35 percent in 2004. Newspapers would still be No. 2, but their $92 billion in advertising revenue is projected to account for 20 percent of the global ad market, down from 28 percent in 2004.

For now, though, some types of Internet advertising — real estate, travel and help-wanted, in particular — remain in the funk they fell into in the first half of the year, when U.S. ad revenue on the Web fell 5 percent. (That was still far better than the 12 percent to 29 percent declines suffered by U.S. newspapers, radio stations and television broadcasters.)

David Hallerman, a senior analyst at eMarketer, thinks it’s too early to conclude the entire Internet advertising market is on the upswing. “It’s more like the patient had a 105-degree temperature and now it’s down to 100 degrees,” he said.

EMarketer expects Internet ad sales in the U.S. to fall by nearly 3 percent in the second half of this year, slightly less than in the first half. The research firm expects a 6 percent increase next year followed by a 7 percent gain in 2011.

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