NYT: With Soft Economy, Search Faring Better Than Display
From the NYT, May 19, 2008, “Online Search Ads Faring Better Than Expensive Displays”:
While search advertising remains strong, there are signs that the growth in online advertising — particularly in more elaborate display ads — is slowing down. In the past few weeks, major online-advertising players, like Yahoo and Time Warner, have posted mixed results.
And online publishers may be getting less money for the ad space they do sell. The prices paid for online ads bought through ad networks dropped 23 percent from March to April, according to PubMatic, an advertising-technology company in Palo Alto, Calif., that runs an online-pricing index. Large Web publishers fared the worst in PubMatic’s study, with the prices they received through networks dropping 52 percent.
“The weakest form, the one that’s most susceptible to a downturn — and this is what we’re seeing — is display advertising,” said Jeffrey Lindsay, senior analyst at Sanford C. Bernstein & Company.
Display advertising at the network AOL declined 18 percent, to $191 million. AOL is owned by Time Warner, which reported results last month.
“We were not satisfied with the performance of display advertising on our owned and operated inventory, which declined compared to last year’s first quarter,” said Jeffrey L. Bewkes, the chief executive of Time Warner. (Mr. Bewkes blamed AOL itself, not the economy, for the company’s poor performance.)
And (emphasis mine):
“The new advertisers are more cautious about requiring some sort of proof or evidence that something is working,” said Paul Iaffaldano, executive vice president and general manager of the Weather Channel Media Solutions. Existing clients, he said, are continuing to spend, just not at the same pace.
One area that remains strong is search ads. They are considered cheap and effective among marketers — even in a potential recession — and they are how Google makes the majority of its money. In the most recent quarter, Google had a profit of $1.31 billion on revenues of $5.19 billion. Its United States revenue was up 30 percent from last year.