The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) just released the quarterly Internet Advertising report. Mark Walsh at MediaPost shared his insight yesterday. Internet advertising revenue reached $5.9 billion in the 3rd quarter of 2008, an 11% increase from the 3rd quarter of 2007. Is it good or bad? First for some perspective. When we started 2008, the Internet advertising revenue numbers looked like this:

   2006 (Actual)  2007 (Actual)  2008 (Estimated)  2009 (Estimated)
 Internet Advertising Rev (Billions)  $16.8B  $21.2B  $25.9B  $30.0B
 Year-over-year Growth (%)  34%  26%  22%  16%

A double digit growth in Internet/online advertising is impressive considering that total advertising is expected to grow in low single digits. No surprise that online is taking its fair share of advertising budget gradually.

Where is online advertising likely to end up at the end of this year and in 2009? And are consumers shopping for holiday deals likely to see more or less advertising on the sites they visit this holiday season than last year? Depends! Depends on who is more desperate, advertisers or publishers. Online advertising in the first 9 months of 2008 totaled $17.3B with Q3 revenue coming in at $5.9B (11% increase from Q3, 2007 numbers). I think it will be foolish to think that in this holiday season advertisers will spend more than they did last year (Q4, 2007 online ad spend stood at $5.9B - same as Q3, 2008). Why? two of the largest spenders, automotive and financial services brands, each spending a couple of billions a year on online advertising have pulled back dramatically, surprise, surprise. On the other hand, technology, telecom and CPG (Consumer Package Goods, P&G being the largest) advertisers are spending aggressively in this environment. But I don't believe they will be able to make up for the shortfall from financial services and automotive, pulling Q4 online ad spending down from last year's level. My best guess? $5.5B-$5.7B (i.e., a decline of 3%-7% from last year's level). This brings the total online ad spending this year to $22.8B-$23B, an annual growth of 7%-8%, a more conservative number than what others like Mark Mahaney @ Citi have predicted and more inline with Mark Walsh over at MediaPost.

And as for next year. I think online advertising is going to contract. Everyone is going to be optimizing the spend in light of much softer consumer spending in 2009.

So what does this have to do with consumers seeing more or less ads? Well, we are inundated with online properties that rely on advertising dollars to survive and that can't effectively target ads to drive commerce. Media planners will will be more selective in where they allocate their ad dollars and lot of online properties that aren't able to attract these premium advertisers will scramble to get whoever they can at whatever CPMs they can (driving volume of low-priced ads high). So don't be surprised to see more cereal and value meal ads in unusual places :-). This is likely to result in consumers seeing more (less desirable) ads even though total spending is likely to be down. 

How is Retrevo positioned in this environment? We started bringing brand advertisers to retrevo.com in the middle of this year. We delivered a unique and targeted experience to our audience around prestigious brands such as Sony, Microsoft, Lenovo, Linksys and HP on one hand, and delivered desired results to these brands on the other. The result? These prestigious brands continue to allocate a healthy portion of their budget to advertise for Digital Cameras, HDTVs, Laptops, Cell Phones and such on Retrevo. No cereal ads on Retrevo, I  promise :-). We at Retrevo will continue to bring innovation, honest advise and good company as you plan your strategy for Black Friday and this holiday season!

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