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Kantar: Display Ad Gains Are Offset by Plunging Search Market

  |  December 20, 2011   |  Comments

Insurance, legal, and medical services firms slashed their search spend this year, researcher says.

Despite strong growth in display advertising for the first nine months of 2011, a tumbling market for paid search dragged overall Internet ad spending in the U.S. down 2.9 percent in the third quarter, at least according to a new report from WPP's Kantar Media.

Spending on display ads rose 10.1 percent from January to September of this year, with spending in the third quarter reaching 15.8 percent. However, the researcher believes spending on paid search advertising dropped 2.1 percent during the first nine months, with the biggest drop - 15.8 percent - coming from July to September.

Kantar's report placed blame for the third quarter search losses on "continuing reductions from insurance companies, legal services and medical care providers."

The falloff stands in stark contrast to search leader Google's own revenues, which rose almost 31 percent during 2011's first nine months compared to the same period in 2010. Meanwhile its net income rose almost 18 percent. Asked about the disparity, Jon Swallen, SVP of research at Kantar Media North America, noted Google's results include search, contextual, and other ad formats and said Kantar limits data collection to the top 20,000 subdomains per month. "We're making estimates of a model that works with optimization of keywords, pricing, basically information that can be scraped off the Google API," he wrote in an email.

Kantar first observed the drop in spending from financial, legal and medical marketers around the end of the first quarter - and the drop continued right through Q3. Swallen said, "I don't know if it reflects a variance in ad impressions vs. variance in keyword pricing. I can't comment which of those two factors is more responsible for the declines, but the decline is primarily coming off those financial services."

Overall, Internet ad spending rose narrowly by 2.8 percent for the first nine months of 2011.

Total advertising spending in the U.S. grew modestly from January to September, then slowed to a crawl in the third quarter.

Third quarter ad spending was up just .4 percent compared to last year, capping a nine-month period that saw growth of just 1.5 percent. The total amount of ad sending for the first three quarters of 2011 was $104.7 billion.

The picture looks bleaker when spending for each quarter is looked at separately. After a promising first quarter jump of 4.1 percent, spending decreased in every subsequent quarter, to 2.8 percent and then to .4 percent.

"The cautious optimism for the advertising market at the beginning of 2011 has been replaced by the statistical evidence of progressively slowing growth rates," said Swallen in a statement. "During Q3, an expanding number of the largest marketers became even more conservative with their ad budgets and these reductions have neutralized the healthy spending growth occurring among mid-sized advertisers."

Third quarter spending on both television and outdoor media grew 3.2 percent. Magazine spending was down 1.2 percent, while radio was up 1.1 percent.

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ABOUT THE AUTHOR

Douglas Quenqua is a journalist based in Brooklyn, NY who writes about culture and technology. His work has appeared in The New York Times, Wired, The New York Observer, and Fortune.

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