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.