TNS: Ad Buyers Hit the Brakes in Q3

Overall ad spending declined 1.7 percent during the first nine months of 2008 compared to the same period last year, a number that rises to 2 percent for the third quarter alone, according to data released today by TNS Media Intelligence.

And while spending on Internet display ads represented a bright spot — up 7 percent for the nine-month period — the data show advertisers are moving their money to the Web at a slower rate than they had been for the past several years.

“If you go back to 2005 and 2006, you see double-digit growth rates for Internet display advertising,” said Jon Swallen, SVP Research at TNS Media Intelligence. That rate dipped to about 8 percent in the first quarter of this year, and now shows signs of continuing decline.

Internet display spending growth “is still in positive territory and is one of the few media that can make that claim, but the fact is that growth rates are shrinking,” he said. “Despite the advantages the Internet has going for it — and it still has those advantages — advertisers are moving money online slower, which says that they are cautious and concerned about the general economy.”

TNS tracks display advertising online only, and does not provide data for search.

Also in positive territory was network TV, with a growth rate of 3 percent for the first nine months of the year. However, without the added boost of Olympics and election advertising, that number would have been in flat or negative territory.

Spending on newspaper and magazine ads continued to plummet. Magazine spending was down nearly 4 percent, while newspapers declined a whopping 10 percent.

Local advertising also continued its decline, dropping 6.7 percent, thanks largely to the slowdown in automotive, retail and telecom advertising.

The good news for Internet publishers is that the number of display ads has decreased, said Swallen, meaning that the price of ads has held steady even as growth rates slow.

“It’s not that [advertisers] are paying significantly less for ads, it’s just that the rate at which they’re placing them is slowing down.”

And surprisingly, financial services companies continue to be a healthy source of ad spending online.

“Despite all the bad headlines about the financial service business and the meltdown news, while their ad spending over several years has been flat, they’re continuing to pump money into the Internet.”

Despite the few bright spots, the new numbers represent an undeniably bleak portrait of the ad market — especially considering the data released today represents the period before the financial crisis truly took root in the U.S., as financial institutions began failing in September and October and consumer spending froze.

“Early data available for the fourth quarter suggests that the ad economy has weakened even further,” Swallen said. “It’s too soon to sort out all the individual media, but in aggregate we’re seeing ad budgets continuing to shrink through October and into November, and that doesn’t surprise me.”