The once-hot market for Web banners is not only cooling, it’s in danger of going subzero.
A rash of earnings reports from online ad companies shows that marketers are rapidly pulling back on banners and other kinds of display advertising, in particular flashy “branded” campaigns companies run in hopes of projecting a certain image.
Display ad growth has slowed so dramatically in recent months that several analysts are predicting the category is headed for a sharp downturn in 2009 after years of double-digit gains. This is in contrast to paid search – namely, the small text ads that Google runs on Web pages – that is still growing at a fast clip.
“Not only will we see [display ad] growth decelerate, it could go negative next year,” said Colin Gillis, an analyst at Canaccord Adams.
Gillis expects the category to be down 6.7 percent in 2009 compared with this year, although he’s hopeful growth will resume in the second half. RBC Capital’s Rob Sandler, predicts display advertising next year will be anywhere from flat to down as much as 10 percent next year.
The conventional wisdom has been that the Web will withstand an economic slump better than other media because it’s easier to measure, making it more attractive to marketers under pressure to show their ad dollars work.
Companies ranging from huge Web portals to niche sites are testing that assumption. Yahoo!, the display ad leader, reported third-quarter results that show display ad revenue on the company’s owned-and-operated sites rose just 3 percent, down from a 21 percent gain in the year-earlier period.
Large publishers, such as The New York Times, also report weakness in display ad sales on their Web sites. Even financial site TheStreet.com, which saw its audience jump 27 percent in the third quarter amid the economic turmoil, missed analysts’ estimates by a mile due to a sudden decline in financial-services advertising.
“For anyone that doesn’t believe that Internet advertising is going to be impacted in the current media recession, look no further than TheStreet.com’s results this quarter,” said ThinkPanmure analyst William Morrison in a note to clients.
Most analysts released bullish forecasts earlier this year projecting continued double-digit growth in 2009 for the online ad market, including search and display. In August, researcher eMarketer predicted the overall market would rise 14.5 percent, including a 13.6 percent gain in display advertising.
But that forecast came out before the bout of bad economic news in September. Indeed, second-quarter display advertising had already slowed to about 5 percent from 14 percent during the quarter, according to a report from the Interactive Advertising Bureau. Like the eMarketer, the IAB defines display advertising as Web banners and other static ads. Online video and rich media aren’t included in the category.
EMarketer analyst David Hallerman said he will take a less rosy view when the group releases an updated forecast next month, although he still expects the display ad market to grow next year.
“We don’t have new numbers yet, but there is a good chance next year will be flat,” he said. “I doubt it will be in negative territory.” holly.sanders@nypost.com