Online advertising revenues have fallen

Asked about a possible recession early in 2008, IDC analyst Karsten Weide said, “We think there will be some effect on advertising spending overall, but online ad spending will almost be unaffected-even if there’s a depression.”

What a difference a year makes.

According to the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC), total online advertising revenues in Q1 2009 fell to $5.48 billion, down 10% from the previous quarter and down 5% from Q1 2008.

That snaps a growth streak that started in Q2 2008 and is the first negative year-over-year rate since 2002.

David Silverman of PwC, playing matters down, said, “Current economic conditions are clearly challenging.”

Online advertising had been relatively unaffected by the downturn, partly because it used to be considered experimental, but it is now an essential part of the media mix for many advertisers.

“In some ways the decline further reinforces how online ad spending is a central part of the mainstream,” said David Hallerman, eMarketer senior analyst. “As other media are experiencing even greater ad spending declines, the Internet cannot resist larger economic forces.”

Backing up Mr. Hallerman’s thesis, Nielsen Co. figures show how widespread the ad decline has been.

Nielsen puts the Q1 Internet display advertising decline at only 3.4%.

Still, many pundits thought that digital advertising would not dip into negative growth because it was less expensive and offered more measurability than traditional media channels. But when companies don’t have money to spend, it doesn’t matter how attractive an offering is.

“The Q1 results from the IAB and PwC came in lower than eMarketer expected,” said Mr. Hallerman. “Whether the new numbers are an indicator for spending trends through the rest of the year, however, will not be clear for several months.”

If spending stays relatively flat from Q1 on, the online sector would see total 2009 spending of around $22 billion, lower than even most bearish estimates back in 2008.

“We’re confident that growth will resume as the US economic climate improves,” said IAB President Randall Rothenberg.

Until then, online advertising will continue to struggle.

Via emarketer