The Wall Street Journal reported on Wednesday that the online advertising market is forecasted to drop 5% in the first quarter of 2009 (by research group IDC), the market's first contraction since the dot-com bubble burst in 2001. This is a far cry from what research was suggesting only months ago - that the market would continue to grow despite the worsening economy. The Washington Post ran an article by Sarah Levy (http://www.washingtonpost.com/wp-dyn/content/article/2009/02/25/AR2009022503245.html) that suggested two assumptions were at the root of the perpetually bullish views on online advertising:
"One was that online advertising is more actionable and more measurable than advertising in the offline world. The other was this pie chart that Yahoo’s PR department used to love to trot out showing the discrepancy between the amount of time people spend online and the percentage of advertising spend that goes online. ‘At some point, that has to balance out, right? RIGHT?’"
Measuring online advertising is turning out to be more convoluted than originally thought and metrics are still hardly reliable (http://www.businessweek.com/technology/content/jan2009/tc20090127_410266.htm). Sarah Levy continues to suggest there is a dearth of innovation in this space, when it's clear that innovation is what's going to grow the market. She says:
"Google-aside, I think the Web industry has gotten lazy when it comes to advertising innovation. There's too much outsourcing to the ad networks and too much of an assumption by the portals and other large properties that gaudy eyeballs will be enough. That's old media thinking."
Apparently many e-marketers are spooked by IDC's data. Hopefully this will push marketers away from old media thinking and lead to more innovation that the market requires to flourish.
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