September 23, 2007 7:10 pm

Online advertisers may gain from downturn

Online advertising spending is widely predicted to continue its strong growth even if a US economic downturn squeezes the advertising sector as a whole.

Indeed, pressure on companies to cut costs if the economy softens could even hasten the switch in spending from traditional media to more targeted and measurable digital forms.


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Some of the US mortgage lenders embroiled in the recent lending crisis have stepped up online spending, attracted by the ability to entice people to click on ads.

“If marketing budgets shrink, and they are often the first to be cut in a downturn, digital will still continue to grow,” said Eric Bader, managing director of digital at MediaVest.

“The focus will be on advertising that can be measured for effectiveness, and online will gain share relative to television, newspapers or radio.”

Online is the fastest-growing advertising sector, and could reach over $20bn this year, just over 7 per cent of the total $285bn US advertising market.

In the last US downturn, online spending was slashed, resulting in the collapse of many new media companies and billions of dollars of writeoffs in investments which had counted on online ad revenues.

Since then, the growth of search, dominated by Google, as well as other forms of online advertising, and the growth of networks that allow advertisers to target certain types of audiences, have increased confidence in web spending.

Among US mortgage lenders, Countrywide has, for example, increased its share of online ad spending from 21 per cent to 55 per cent in the last 12 months, according to Sanford Bernstein.

Mortgage advertisers, estimated to account for 3.4 per cent of US online advertising, might scale back spending if there is a recession, but the effect would be limited. “The greater robustness of online advertising, the prevalence of paid search as the primary ad format and great geographical diversity of revenues of the large players make a repeat of the 2001-2004 bubble scenario unlikely,” said Sanford Bernstein.

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