Will display ads truly decline in the near future?

October 20, 2008

Will display ads truly decline in the near future?Display advertising has always been an important aspect of many online business models- AOL, CNet, ZDNet, and many other content networks rely heavily on display ad revenue to keep their doors open.  While many think the importance will never diminish, others believe online ad spending will fall sharply in the very near future.

Henry Blodget of the Silicon Alley Insider seems to support the latter opinion with a report published today.  Despite what leading analysts speculate, Mr. Blodget is under the impression that “Online display-ad spending will fall in 2009, probably sharply, and even more by 2010 and beyond.”  While this theory might be relevant while the economy is in a downward spiral, I would have to disagree with the notion that spending will continually go down year after year- especially after an inevitable re-bound.

So what exactly is fueling the idea that display advertising has finally leveled off and could fall sharply?  By Q2 of this year, online ad spending had already slowed sharply to mid-single digit growth- and that was before things started to take a turn for the worse in terms of the economic meltdown.  According to IAB, the growth of “non-search online ad spending (display, classifieds, lead-gen) was 14% in Q1 and 5% in Q2.”  That’s before what Blodget calls “the horrific fall-off in consumer spending in September.”  While that’s a huge drop no doubt, it falls in line with other industries who’ve seen a steady decrease in growth recently.

While 5% growth is nothing like it’s been since its inception, it’s still growing, which is important.  Many other industries aren’t seeing any growth whatsoever, which would be a true cause for concern.  While I agree that it’s a big deal for content-based networks and startups, I don’t think it’s detrimental at this point.  If companies continue to position themselves for the decline, and prepare for possible long-term effects much like Gawker Media and others who are inducing mass-layoffs and pay cuts, they’ll likely be okay in the long run.  The simple truth is that eyeballs are moving away from traditional media, and moving quickly to online content.  As long as this remains true, online ad-spending will always be strong.  Its growth might decline slightly due to the economic times, but that’s true in any industry.

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2 Responses to “Will display ads truly decline in the near future?”

  1. Steve Wright:

    I agree with you that the future is online, but you need to question how much of the spend is going to go to display, compared to search.

    Online display advertising is a throwback to print; search advertising, which is driven by context and relevency makes a lot more sense for online marketers.

  2. Neeraj Bansal:

    Declining revenues are bad news for the networks in the short term, but great news for small- to mid-sized advertisers who wouldn’t have even considered display as part of their marketing mix last year. Gone are the days of $25K minimum spends and limited functionality. Sites like BidPlace SB and AdBrite are opening up self-service display to the same targeting and accountability that larger clients have demanded (and benefited from) for years. Display isn’t going to replace search for advertisers in most verticals, but it can be a good low-cost, high-reach complement.

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