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Forecast For Ads Online Dips 10%

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By MICHAEL LIEDTKE

The Associated Press

Published: December 1, 2008

SAN FRANCISCO - A marketing research firm is dimming its Internet advertising outlook for the next four years, the latest sign of the more austere times looming for the high-tech sector.

In revisions made last week, eMarketer estimates U.S. advertisers will spend $25.7 billion on the Internet next year - about $2.7 billion, or 10 percent, less than a forecast from just three months ago.

The more sobering projections extend through 2012 when eMarketer envisions $37 billion being spent on U.S. online ads. That figure represents a drop of $13 billion, or 26 percent, from the 2012 estimates that eMarketer drew up in August.

Since then, the global economy has been rocked by the United States' worst financial crisis since the 1930s. The turmoil has included the collapse of big banks such as Washington Mutual Inc. and Lehman Brothers, triggering a steep decline in the stock market despite huge U.S. government commitments aimed at restoring order.

Technology Companies Feel Pain

The rescue plan hasn't been enough to prevent mass layoffs or home foreclosures, pushing the U.S. economy toward its most severe recession in more than 25 years.

The pain increasingly has been hurting technology companies that had been viewed as a safe haven until recently.

Both analysts and investors reasoned the high tech industry would hold up better than most. Meanwhile, advertisers were supposed to be still spending money freely online in hopes of connecting with the Internet's expanding audience.

But those perceptions have shifted as more technology companies have acknowledged the tough times are crimping sales.

EMarketer's new advertising estimates represent an even bigger comedown from another projection the firm made in March. Back then, eMarketer predicted Internet ad spending in the United States would hit $30 billion for the first time in 2009.

Market Slowed But Still Growing

Although it's not as optimistic now, eMarketer still expects the Internet ad market to grow by 9 percent next year. That would represent a slowdown from an 11 percent increase projected by eMarketer for this year.

Google should remain the biggest beneficiary because its system for showing ads next to search results is expected to remain an effective marketing vehicle.
EMarketer predicts U.S. search ads will rake in $12.3 billion next year, up slightly from its August estimate of $11.9 billion.

The Internet's billboard-like "display ads" won't hold up as well. EMarketer anticipates online display advertising will rise nearly 7 percent next year to $4.9 billion, down from its August estimate of a 14 percent increase to $5.9 billion.

If eMarketer's projection proves accurate, it would represent yet another blow to Yahoo Inc., which is more dependent on display ads. The company's recent funk prompted founder Jerry Yang to agree to step aside as the company's chief executive when a replacement can be found.

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