Internet Maintains Growth While Total Ad Spend Declines

  |  September 11, 2007   |  Comments

Web ad spending grew 17.7 percent in Q2, while the total ad spend shrank for the second consecutive quarter.

Total advertising expenditures suffered a 0.3 percent loss in Q2 2007, their second consecutive quarterly decline, according to TNS Media Intelligence. While Internet advertising gained by 17.7 percent, the trend indicated an overall reduction in media budgets that could over time threaten online spending.

Internet spending grew 17.7 percent to $5.52 billion over the first six months of the year. Other categories experiencing growth included consumer magazines (6.9 percent), outdoor (3.6 percent), and cable TV (2.8 percent).

"Still the Internet continues to take in a larger share of the pie, even as the total pie is shrinking," said Jon Swallen, SVP of research at TNS Media Intelligence. "The Internet's slice of that pie is getting larger... primarily at the expense of newspapers, and to a lesser extent television."

Categories experiencing declines included newspaper (5.7 percent), radio (2.7 percent), and broadcast TV (3.6 percent).

"The newspaper industry's own tracking shows that the rate of growth in Web advertising on newspaper sites continues to get larger, but getting larger at a smaller rate," said Swallen. "Incremental revenue from Web advertising is not offsetting and making up for lost revenue in the print edition." For every dollar brought in for a print ad, the counterpart Web ad costs between 20 and 30 cents, he said, so newspapers are still short 70 to 80 cents on the dollar for every ad placement that migrates from one channel to the other.

Meanwhile, the decline in overall ad spending may be a reflection of general economic weakness, as indicated by slower growth in retail sales, rising unemployment and flagging consumer confidence, among other factors.

Swallen said the top 50 advertisers, which account for one third of the ad spend, are tightening their budgets. "The cutback in advertising is being led from the top of the market by big blue chip companies, manifesting itself in fewer brands being supported with ad money. It indicates a retrenchment," he said.

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