Online Advertising Spending Drops 5 Percent in Q2

Online advertising has been hit by the economic downturn as well. While it may be doing much better than other advertising fields, it isn't recession proof, with spending dropping by 5 percent worldwide in the last quarter. The US is faring even worse, with ad spending down 7 percent year over year. What's more, IDC, the research firm that released the data, warns that the trend will continue in the coming quarters as well.

"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. However, we also believe the industry may have to wait until mid-2010 until it sees real growth again," Karsten Weide, program director, Digital Media and Entertainment at IDC, said.

In the US spending went down 7 percent from $6.6 billion in Q2 2008 to $6.2 billion in the last quarter. This follows a similarly bleak first quarter when the decline was of 5 percent, from $6.1 billion in the first quarter of 2008 to $5.5 billion in Q1 2009. Worldwide the numbers are similar, with a 5 percent decline in the advertising budget for the second quarter, dropping from $14.7 billion last year to $13.9 billion in Q2 this year. This too follows a similar first quarter.

By categories, classifieds saw the biggest drop, shrinking 17 percent year over year, followed by display ads with a 12 drop in spending. Search ads were the least hit, which might explain why Google was the only large company to see growth in the second quarter, albeit a single-digit one. Others weren't as lucky, with large players including Yahoo but especially AOL seeing diminished revenue from advertising. Poor ad sales were also partly to blame for News Corps’ recently announced dismal financial results for the past fiscal year.