The Recession Will Hit the Web

Posted by: Catherine Holahan on March 18, 2008

Wall Street’s pain will make it to the Web.

On March 18, eMarketer reduced its estimates for the US online advertising market by nearly $2 billion, citing the “foundering economy.” The research firm now predicts that online advertising will grow to just $25.8 billion this year.

Though the revised number is still 23% higher than 2007’s total, it shows the economic downturn will impact the Web.

Executives of online companies have long argued that the continuing shift of marketing dollars from traditional media to the more measurable Web would insulate their companies from a recession. Some have even said that cutbacks in ad budgets would accelerate the online advertising market's growth by enticing companies to spend their dollars where effectivenes can be catalogued with clicks and impressions. "Advertisers, in maybe even difficult markets and what not, just have great incentive to get as much profitable inventory as they can from Google," said Google's Sergey Brin in a Jan. 31 call with investors.

But, eMarketer is betting that--even with the shift in ad dollars to online--Web companies will see an impact. That's not good news for Google, Yahoo, Microsoft or any of the companies betting on an online ad boom in '08.

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Reader Comments

dg

March 18, 2008 09:40 PM

Even if more dough goes to web ads, what about ad saturation? I hear from so many people that they don't even notice ads anymore. And there is such a battle for top spots on search results and such. TV ads deal with TIVO, web ads deal with ad blockers...will the effectiveness of ads affect the profits as well?

workpost

March 19, 2008 03:57 PM

Ad saturation is definite problem that everyone who makes money from advertising online should be worried about. Dg is right, like flipping from channel to channel during tv commercials, visitors have learned to ignore ads.

We have to think of better ways to do this.

George

March 21, 2008 04:59 PM

I think Google & friends are being naive, and should look at the eBay case as an example. A good while ago Google angered eBay by trying to lure PayPal customers to Checkout by throwing a competing party during the eBay Users Conference in Boston. In response, eBay pulled most of its AdWords budget. Google immediately backed off, as eBay was (and may still be) their largest ad buyer.

What was interesting though is that eBay found that they didn't lose all that much traffic, and never fully reinstated their AdWords budget.

Many other webmasters have commented as well that they wouldn't ever buy AdWords, because they get hundreds of thousands of targeted visitors from Google for free anyway.

So I'd say what we will see is companies shifting their spending to SEO, possibly from their online advertising budgets.

Gab Goldenberg

March 21, 2008 06:05 PM

I was emailing my college economics prof about this months ago. There's a glut of advertising, and it's only getting worse. Consider this trendwatching piece to get an idea why that is:

http://www.trendwatching.com/trends/freelove.htm

Cheers,
Gab
p.s. I wrote something similar about this earlier in the week:
http://seoroi.com/seo-roi-quality/scratchpad-questions-reputation-management-domains-and-ppc/

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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