Don't Buy Into Any Reports On Q4 Online Ad Revenue Just Yet

from the flushed-out dept

In the last month or so, we heard a few different reports making the rounds claiming that "online advertising is back!" after lots of companies had great fourth quarters when it came to online ad revenues. The latest to report such a thing is the NY Times, who saw a big boost in online ad revenues in the fourth quarter, leading a bunch of people to wonder if maybe online ad revenue is taking off in a big way. While advertising has always been a cyclical market, and will certainly continue to grow, I think people are overreacting to Q4 of 2009.

Frankly, we saw the same thing here. While we don't rely on ad revenue as the core of our business model, we do make money on advertising, and we had a great fourth quarter on that front, as advertisers were pumping tons of money into ads. But I don't think it's a sign of anything to get too excited about -- and that's because a lot of companies were really skittish earlier in the year, so I think a large chunk of Q4 online ad spending was a mirage. Here's why:

The economy took a nosedive in the fourth quarter of 2008. By that point, lots of companies had already set their 2009 ad budgets, and had committed to at least a decent portion of what they planned to spend in Q1 of 2009. However, once the credit crunch went into overdrive, and there was all sorts of talk about how the world economy might collapse and we'd all be living in a post-apocalyptic Mad Maxian world, lots of companies hit the brakes, and didn't want to commit to spending. A bunch of companies simply stopped spending on online advertising until they knew what was going on. Then, along came Q3, and suddenly the marketing VPs and directors realized they were approaching the end of the year, and still had huge chunks of money that had been budgeted in 2008 for 2009, but hadn't been spent. And the way lots of companies do budgeting is that, if you haven't spent it, you get less the next year. So, these marketing folks had to quickly spend the budgets they had meant to spread out over the entire year, and they dumped a bunch of it into online advertising, because it was quick and easy.

So, I don't think that any of the Q4 reports you hear about concerning online advertising should be considered as an indicator of very much in terms of the future.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Free Capitalist (profile), Feb 12th, 2010 @ 6:06am

    Yes

    That's a highly plausible theory in the business world, Mike. I found the same head-in-the-sand spending mentality with pretty much every company I did business with or heard about through friends in the first half of 2009. When "the big guys" act panicked, the sheep do follow, to whatever end.

    Of course, its never a good idea to leave an excess of funds in the budget, if the business unit and line managers have remote hopes of getting the same or better budget the next year.


    It's The Ostrich Effect

     

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  2.  
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    BBT, Feb 12th, 2010 @ 6:32am

    This is a reasonable theory, but you really shouldn't state your guess as if it were fact. You have no idea whether that happened or not.

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Radjin, Feb 12th, 2010 @ 6:37am

    Ads requiring me to react

    Any sight that slides an ad out, blocking the content I wish to see and requiring me to click will be removed from my list of places to visit.
    These ads are not only irritating but they require me to click something which I really have no idea what the click will do; install a virus or other unwanted software on my computer? I know one person will have no effect in this but I am hoping there are others who feel the same and will also vote their irritation with such dangerous practices.

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Anonymous Coward, Feb 12th, 2010 @ 6:40am

    If you you say is true, Mike, that I suppose the boost in ad spend would be across all mediums and not just online ads

     

    reply to this | link to this | view in thread ]

  5.  
    identicon
    mike, Feb 12th, 2010 @ 6:51am

    Q4 up 50%

    my Q4 2009 ad revenue was up 50% from previous quarter and this quarter is similar to Q3 2009. Ad spending is down and the spike in Q4 2009 was end of year spending budgets.

     

    reply to this | link to this | view in thread ]

  6.  
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    Anonymous Coward, Feb 12th, 2010 @ 7:17am

    Re: Ads requiring me to react

    +1

     

    reply to this | link to this | view in thread ]

  7.  
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    The Anti-Mike (profile), Feb 12th, 2010 @ 7:46am

    Gee, q4 2009. Let's see.

    Christmas. Always a good time for advertising.

    Plenty of new phones and gadgets that got major media coverage. I seem to remember Techdirt not just having ads, but just about being skinned not once but twice.


    Plenty of companies coming out of the recession period attmepting to buy business at the year end, when people are typically spending. That includes in the B2B area, where all companies are working to set their 2010 budgets.

    Q4 may be more about companies who didn't advertise in the previous quarters and kept their ad dollars to make the most impact at a given time.

    You don't know, and I don't know. We can guess, but all they are are guesses.

     

    reply to this | link to this | view in thread ]

  8.  
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    mrharrysan (profile), Feb 12th, 2010 @ 8:49am

    Re:

    Wow TAM, 2 comments in one day that are actually constructive... you may yet see the light!

     

    reply to this | link to this | view in thread ]

  9.  
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    Mike Masnick (profile), Feb 12th, 2010 @ 2:51pm

    Re:

    Christmas. Always a good time for advertising.


    Right. Just to clarify, I assumed that was obvious. Q4 is ALWAYS the best quarter for advertising by a long shot. But the point of the discussion (and I apologize if this wasn't clear) was that it was massively better than previous years for almost everyone I spoke to. It wasn't the normal Q4 bump.

    You don't know, and I don't know. We can guess, but all they are are guesses.


    Or, um, we can talk to our advertisers. You know. And they might tell us. As they did.

    So, there's that.

     

    reply to this | link to this | view in thread ]

  10.  
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    The Anti-Mike (profile), Feb 12th, 2010 @ 5:44pm

    Re: Re:

    So your advertisers are the entire market?

    Damn, you are powerful and well connected.

     

    reply to this | link to this | view in thread ]

  11.  
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    Mike Masnick (profile), Feb 12th, 2010 @ 6:23pm

    Re: Re: Re:

    Reading comprehension fail. Try again.

     

    reply to this | link to this | view in thread ]

  12.  
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    Mike Masnick (profile), Feb 12th, 2010 @ 6:27pm

    Re:

    If you you say is true, Mike, that I suppose the boost in ad spend would be across all mediums and not just online ads

    Not really. More and more companies are saying that they've seen online ad spending as being more effective. Plus it's faster and easier to set up and run -- so it made sense as part of the end of the year rush.

     

    reply to this | link to this | view in thread ]

  13.  
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    The Anti-Mike (profile), Feb 13th, 2010 @ 5:21pm

    Re: Re: Re: Re:

    Sorry, you article is about the whole market, not just your site. Perhaps your advertisers are giving you their reasons, but perhaps other have other reasons. I don't think you advertisers are the whole market, right?

     

    reply to this | link to this | view in thread ]

  14.  
    identicon
    Elizabeth Kulin, Mar 1st, 2010 @ 11:21am

    Success!

    Great blog entry! I work at ZEDO and we also believe in the future of online advertising. We are working to make it an even easier space for all you to work in. For example, check out ADMagic (a Firefox browser plug-in that lets publishers analyze an ad’s performance and even change the ad status right on the webpage where the ad is serving).

    The demo can be seen here: http://www.zedo.com/demos/ZEDOAdMagic.html

    Keep up the great work everyone! Cheers,

    Liz@zedo.com
    Marketing Manager

     

    reply to this | link to this | view in thread ]


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