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Techie Alternative to Tonight's McCa...   Why Increase in Online Ad Spending H...
Sep 4 2008 3:25PM EDT

JP Morgan: Online Search Ad Spending More Resilient Than Display

Sam Gustin says: More evidence that weak economy is dragging on Web ad spending, and display ads in particular.

JP Morgan analyst Imram Kahn has lowered his 2008 display ad forcecast from $8.6 billion to $8.2 billion, or 14 percent growth rather than 20 percent growth, and his 2009 online display ad spending forecast from $10 billion to $9.4 billion, or 16 percent growth rather than 17 percent.

Kahn's report is just the latest to highlight the slowing growth in online ad spending. Last month, for the third time in a year, eMarketer lowered its forecast for 2008 Web ad spending, from $27.5 billion in November 2007 to $25.9 billion in March 2008, and finally to $24.9 billion.

Kahn's analysis suggests that in weak economic times, advertisers will be more likely to stick with simple text-based ads than fancier display ads. Kahn estimates that search advertising spending growth will be lower in 2008, from 32 percent to 27 percent, but will then remain basically flat in 2009.

The fact that search ads will fare better than display ads, of course, is good news for Google, which owns 70 percent of the Web search market, and has long argued that it is better suited to weather tough economic conditions that other companies who rely on Web ad spending for revenue. Search ad spending is expected grow to $10.4 billion, double that of display ads, according to an eMarketer report cited by the Wall Street Journal.

On the losing side are Yahoo and Microsoft, which had hoped to use display ads to challenge Google. Better luck in 2010, guys.

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