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Clark Dent

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The Online Ad Recession Continues. Is This What A Reset Looks Like?

Public feed posted on Fri, 31 Jul 2009 by Clark Dent


The recession in online advertising, which began in the first quarter of 2009, continued into the second. Every quarter we keep track of the combined advertising revenues of the four largest Web advertising companies (Google, Yahoo, Microsoft, and AOL), which together represent the lion’s share of all online advertising revenues and is a decent proxy for the market as a whole. In the second quarter of 2009, their combined global ad revenues were $7.864 billion, down 3.4 percent from a year ago.

In economics, a general rule of thumb is that two down quarters marks a recession. Last quarter saw the first annual decline in advertising revenues of 2.1 percent. And the annual decline this quarter got a little worse. However, on a sequential basis compared to last quarter, it is actually pretty much flat (but still down 0.18 percent). So we now have two down quarters on both an annual and sequential basis.

Will this recession continue into the current quarter, or did we just witness a fundamental “reset”, as Steve Ballmer likes to call it. What that implies is that advertising revenues have been reset to a lower level from which they can once again grow. We’ll see what happens in the third quarter, but anecdotally I am hearing from advertising startups that the worst is behind us.

This may be wishful thinking, of course. But barring any new economic catastrophe, the advertising levels of the past two quarters seems like the new floor. But how long will it take to get up off that floor?

These numbers represent global advertising revenues, and include network revenues paid to affiliates through AdSense and Yahoo’s ad network. Google’s licensing revenues for Google Enterprise Apps have been stripped out. For the other companies, we include only the advertising portions of their online revenues as reported in their quarterly earnings statements.

Below is a table with all the numbers:

Online Advertising Revenues (in millions)

4Q071Q082Q083Q084Q081Q092Q09
Google$4,758$5,086$5,185$5,352$5,504$5,331$5,336
Yahoo$1,590$1,572$1,587$1,563$1,594$1,383$1,378
Microsoft$860$840$840$770$866$721$731
AOL$620$552$530$507$507$443$419
Total$7,828$8,050$8,142$8,192$8,467$7,878$7864
Sequential Growth Q/Q2.84%1.14%0.61%-7.00%-0.18%
Annual Growth Y/Y8.21%-2.10%-3.41%

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