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By Mel Duvall
For a time it seemed that nothing could slow down the locomotive that was online ad spending. But now it seems even Internet advertising is falling victim to the recession. In its latest update research firm IDC forecasted that worldwide Internet advertising fell by 5% in the second quarter of 2009, from $14.7 billion to $13.9 billion.
It marks the second quarter in a row that online advertising revenues have fallen.
The news appears to be worse in the U.S. market than overseas. IDC says all advertising formats saw year-over-year revenue losses. Display ads were down 12%, classifieds shrank 17%, while search ads held up relatively well, falling 3%. Google was perhaps the one exception, posting low single digit growth.
IDC says the worst affected were online job site Monster.com with a 31% drop in revenue, and AOL which was hit by a combination of display ad sales declines and internal sales problems.
"We think the industry will continue to see losses in the third and fourth quarters, but the growth rates - or the loss rates, if you will - will eventually begin to improve," said Karsten Weide, program director for the Digital Media and Entertainment practice at IDC. "However, we also believe the industry may have to wait until mid-2010 until it sees real growth again."
Looking ahead to the remainder of the year, IDC says there is good and bad news. The bad news first: Given the second quarter numbers and the outlook provided by such media companies as Yahoo, IDC expects advertisers to further decrease their spending in the third quarter by about the same amount as in the first and second quarters of 2009.
On the positive side, it does not appear as though the rate of decline will get any worse.
Now compare the IDC forecast to another report that came out earlier this week from research firm PQ Media. According to the Stamford, Conn. firm, spending on word-of-mouth, or social networking media, rose 14.2% in 2008 to $1.54 billion and is on pace to grow another 10.2% this year.
Word-of-mouth marketing includes such channels as Twitter, Facebook, and social media sites like CIOZone. "This report shows that brands value and invest in word-of-mouth," said PQ Media Chief Executive Patrick Quinn. "Our research indicates that brands are allocating more of their budgets to long-term word-of-mouth campaigns, executing effective online and offline activities that resonate with consumers and their core groups."
The bottom line: companies are trimming their online advertising budgets for now, but in the meantime they see value in experimenting and investing more in new social media marketing programs.
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