Worldwide Online Ad Spending Contracts 5% in the Second Quarter, U.S. Loses 7%, According to IDC

FRAMINGHAM, Mass., August 5, 2009 – Worldwide spending on Internet advertising contracted for the second consecutive quarter, by 5%, to $13.9 billion from $14.7 billion in the same quarter a year ago. IDC's Worldwide and U.S. Internet Ad Spend Report 2Q09 (forthcoming) found that all global regions posted losses, with the exception of the Asia/Pacific region and Japan, which saw slight gains in the second quarter (2Q09). U.S. spending also declined for the second quarter in a row, by 7% year over year, to $6.2 billion from $6.6 billion.

In the United States, all major advertising formats saw year-over-year revenue losses, with search ads being least affected, display ads losing 12%, and classifieds shrinking 17%. All major publishers' ad sales declined, for the most part at double-digit loss rates, with Google being the only exception, posting low single-digit growth. Worst affected were with a 31% decline, suffering from the terrible condition of the classifieds business in the current downturn, and AOL, hit by both the weakness in display ads as well as internal sales problems.

For the coming quarters, there is good news and bad news. The bad news first: Given the 2Q09 numbers and the outlook provided by media companies such as Yahoo!, IDC expects U.S. advertisers to decrease their online spending quarter over quarter in 3Q09 by about the same amount as they did in the first and second quarters of 2009. The good news: It seems like things are not going to get any worse in the Internet ad industry.

"We think the industry will continue to see losses in the third and fourth quarters, but the growth rates – or the loss rates, if you will – will eventually begin to improve. However, we also believe the industry may have to wait until mid-2010 until it sees real growth again," said Karsten Weide, program director, Digital Media and Entertainment at IDC.

IDC's report, Worldwide and U.S. Internet Ad Spend Report 2Q09 (forthcoming), models worldwide and regional ad spending trends, and monitors the U.S. market in detail. The study reports the total volume and growth rate of the worldwide, regional, and U.S. Internet advertising spending for 2Q09. It also reports the top U.S. new media companies' quarterly domestic ad sales, growth rates, and market shares, as well as the spending on major ad formats and their growth rates and market shares.