Advertising Woes for 2009?
A turbulent year is pretty much a good description of how I see 2009 shaping up for the online advertising industry. For the consumer economy at large we all know the story by now, retailers and manufacturers both large and small are hitting the wall as consumer spend freefalls.
Naturally, marketing budgets are hit, with an estimated 3% decrease in 2008 to a predicted 5.9% decrease in 2009 for total ad spend. Or do we take Nick Denton's dramatic forecast of up to a 40% decline in total ad spend? For the online advertising sector the outlook seems mixed - a case of the cup being half full or empty?
With stats seeming to being revised downwards every few months here is a recent snapshot of what's been happening and the predictions for 2009.
From company surveys:
• Q4 2008: 20% of firms reduced online ad spending while 14% increased. (UK, IPA)
• 2008: 80% of advertisers increased online ad spend, predict will also do in 2009. (Europe, European Interactive Advertising Association)
• 2009: 42% of UK marketers forecast their digital spend to increase. (UK, Marketing Week)
General industry predictions:
• Online ad spend: 20% up in 2008, 16% up in 2009. (global, Jefferies)
• Online ad spend: 18% up in 2009 for North America, 12% up in 2009 for Western Europe. (Zenith Optimedia)
• Online ad spend: 8.9% up in 2009. (US, eMarketer)
• Online ad spend: 4% up in 2009. (UK, Group M) (was lowered from 20% estimate)
• Online ad spend: 2.7% up in 2009. (US, Jack Myers) (was lowered from 13.5% estimate)
• Online ad spend: to fall sharply in 2009. (US, Fitch Ratings)
Specific formats:
• Video ad spend: 45% up in 2009. (US, eMarketer)
• Paid search: 14.9% up in 2009. (US, eMarketer)
• Display ad spend: 14% up in 2008, 7% up in 2009. (global, Jefferies)
So will the forecast of slowing growth or decline of online ad revenue bring about changes to the online landscape? What are the micro trends that we are starting to see?
What of a drop in display advertising, and the significantly important ripple effect for the sites that rely on such revenue? With some 41% of spend going to sales networks, these represent the long tail of thousands of smaller sites.
Will micro-targeting, lower CPMs and a rise of the CPA model mean death to the many smaller 'free' sites that survive on ad-revenue? Or could they become targets for takeovers by brands as promotional vehicles, allowing them to cut out the cost of ad network fees? Will larger 'free' sites be able to find new monetization models?
Perhaps this will be the year for online retail. According to Nielsen Online the top 10 online retailers saw an average of 37% increase in website visitors compared to 2007 during Q4 (includes Christmas shopping period). Whether this is due to increased online promotion, below the line efforts (eg general price cutting, direct mail offers) or to consumer trends of moving online, all could be argued.
Although online spend growth was shrinking at the end of 2008 it still managed a 25% year on year growth over 2007. Match that with estimates of offline retail spend (excluding grocery multiples) shrinking by more than 4% in 2009. Clearly it does suggest there is still growth potential online, for many of the big name retailers who still fail to provide decent online offerings and for the long tail of small and medium independent retailers.
So, how do we summarise these trends? For those competing for the consumer’s purse does search make more sense over display in targeting those who are looking to buy? Or will we see increased marketing spend on targeting tools and onsite conversion efforts?
Will marketers cutting back on traditional offline spend be looking to continue their branding and product awareness goals online? Meaning increased spend in creative efforts such as in-video advertising or ad funded content? Or maybe we will simply be facing cuts all round.
Finally, the stats aside, if you want to hear from those inside the industry how they really see the future, or if you want to come and voice your own opinions, then Chinwag Live shall be hosting this debate on 10th February.
Chinwag Live: Advertising Woes? 10th Feb - Tickets:
Panel:
- Wayne Brown - Head of Account Management, glue London
- Philip Buxton - Digital Strategy Consultant
- Damon Reeve - Co-founder, Unanimis
- David McMurtrie - Head of Product Specialists, Doubleclick
- Guy Phillipson - CEO, Internet Advertising Bureau
- Catherine Demajo - Head of Marketing, Time Out Group
[Picture courtesy of neubie]
Julia Eilon is a business development and marketing consultant. She organises events for Chinwag Live, blogs here and at http://www.juliaeilon.com.
