Source: Mark Long (Yahoo! Tech)
Internet advertising revenue in the U.S. dropped five percent to $5.5 billion during the first quarter, reports PricewaterhouseCoopers and the Interactive Advertising Bureau (IAB).
However, several researchers covering the U.S. advertising market say Internet ad spending has been performing remarkably well in a challenging economic environment, even as the ad revenues generated by conventional print publications have crashed and burned.
“Current economic conditions are clearly challenging,” said PricewaterhouseCoopers partner David Silverman. “Nonetheless, interactive media continues to consume a larger piece of the overall advertising pie.”
Healthy By Comparison
A new report from Nielsen quantifies just how much better online sales are doing in comparison with other media. U.S. ad spending overall fell 12 percent year over year to $27.9 billion in the first quarter, with national print publications among the biggest revenue losers.
Print media ad sales fell 27.7 percent at national newspapers and were down 20.6 percent at the nation’s magazines, Nielson reports. Syndicated TV ad spending fell 18.8 percent in the same period, though network TV ad sales were down only 4.8 percent.
“These first-quarter results will hardly come as a surprise to an advertising industry that’s struggling just like many other areas of the American economy,” said Nielsen Vice President Annie Touliatos. “Now more than ever, it’s important for buyers and sellers to adjust to the changing competitive landscape.”
By contrast, Internet ad spending fared significantly better than other media categories. According to Nielsen, online ad sales declined a comparatively modest 3.4 percent in the first quarter.
IAB Chief Executive Randall Rothenberg expressed confidence that interactive ad revenue growth will resume as the U.S. economic climate improves. “Interactive advertising is the most accountable way to reach consumers — and in this economy, digital media will be a core component of any successful marketing campaign,” Rothenberg said.
With Adversity Comes Opportunity
Forrester Research analysts say most retailers participating in a recent survey believe that the Web channel is better positioned to weather the economic storm than the offline channel, with many retailers seeing the downturn as an opportunity to capture market share from weakened competitors.
“As for specific tactics, paid search continues to reign as the preferred customer-acquisition tactic,” said Sucharita Mulpuru, a principal analyst at Forrester. “However, several retailers report an increased focus on customer retention, for which e-mail is the preferred communication tool.”
There are other signs that online retail spending is on the mend. Last month, comScore estimated that retail e-commerce sales in the first quarter remained flat on a year-over-year basis after falling three percent in the fourth quarter.
Forrester forecasts that Web sales will exceed $156 billion this year, representing about six percent of the U.S. retail pie and 11 percent growth over 2008. “While other retail channels struggle, e-commerce managers have a unique opportunity to drive more sales and to test different tactics that resonate with consumers,” Mulpuru observed.
Spending on direct-response interactive tools is actually increasing with respect to search, e-mail and pay-per-click banner ads, said Forrester Research Vice President and Principal Analyst Shar VanBoskirk. However, overall adoption of spending on branding interactive tools such as CPM-based banner ads is actually on the decline.
“This is certainly related to the economy, but I think is an insight beyond just ‘people are spending less in a bad economy’,” VanBoskirk said.
People are sacrificing branding in preference for marketing that will drive more immediate results, VanBoskirk said. They “are not experimenting with emerging tools as they have in years past because they are being more conservative, sticking with what they know works,” she added.
