Based on the Newspaper Association of America’s figures, 2008 saw advertising spending in newspapers drop by 16.6 percent across each of the national, retail, classified and online categories.

Classified advertising, which accounts for the largest proportion of newspapers’ ad revenue, dropped by 29.7 percent from $42.2 billion in 2007 to 34.7 billion in 2008.
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Research by Borrell Associates predicts that by the end of 2013, local online advertising expenditure by small-to-medium (SMB) U.S. businesses will grow by almost 34 percent from 2008 levels.

Furthermore, companies involved in local online marketing will invest almost 70 percent of their online ad budgets on paid search and video.
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As you might expect (given lies, damned lies and statistics), research firms are sending mixed messages about the state of search advertising expenditure.

On the one hand, eMarketer reports that Google and Yahoo have reported year-over-year increases in their search revenues for the quarter ended December 31, 2008 (Google by 17 percent and Yahoo by 18 percent).
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Data by TNS Media Intelligence indicates that, overall, advertising expenditure declined 1.7 percent during the first nine months of 2008 compared to the same period in 2007.

Further, while ad spending on display ads increased 7 percent during this period, advertisers are increasing their display spend at a slower rate than they’ve done so in the last few years.

The declining growth rate in display spending may not, however, cause ad rates to decline by much, if at all. TNS Media Intelligence has found that the number of display ads has decreased, resulting in the price of ads holding steady.

Source: Douglas Quenqua, “TNS: Ad Buyers Hit the Brakes in Q3″, ClickZ, December 11, 2008

Despite indications that online advertising expenditure, including search engine advertising is either down or flattening, AdGooroo reports that first page advertising activity on all three major search engines was up sharply during the first two months of the fourth quarter of 2008.

Not only was first page spending up during this period, but the growth in first-page advertisers was substantially higher than that in the fourth quarter of 2007. Here are the growth percentages:

AdGooroo points out that while advertiser counts are higher on all three search engines, Google’s 55 percent increase is beyond what can be expected from seasonality alone. It attributes the remaining increase to Google expanding its ad coverage.

Meanwhile, AdGooroo estimates that Microsoft has increased its advertiser share from 11.5 percent in Q3 to about 15.8 percent in Q4 (a 37 percent increase). This brings Microsoft much closer to Yahoo in terms of being the preferred search engine channel for search engine marketers. Currently, Yahoo has a 22.1 percent share, while Google has an 80.3 percent share.

Source: AdGooroo, “AdGooroo Mid-Quarter Search Engine Update - Q408″, AdGooroo, December 4, 2008

Local media research firm Borrell Associates has forecasted local display advertising expenditure to grow by 2.5 percent, from around $12 million in 2007 to $12.3 million in 2008.

Borrell also believes local online advertising will comprise a larger share of overall online ad spending in 2009, when local online ad revenues are expected to increase 11 percent over 2008 to be around $13.6 million.

Borrell expects local paid search advertising to grow almost 22 percent in 2009, while national paid search is expected to lose share, dropping from $12.4 million this year to $9.3 million next year.

Source: Kate Kaye, “Local Advertisers Are Glimmer of Hope for Web Ad Industry in Downturn”, The ClickZ Network, October 29, 2008

Local media research firm Borrell Associates has forecasted local display advertising expenditure to grow by 2.5 percent, from around $12 million in 2007 to $12.3 million in 2008.

Borrell also believes local online advertising will comprise a larger share of overall online ad spending in 2009, when local online ad revenues are expected to increase 11 percent over 2008 to be around $13.6 million.

Borrell expects local paid search advertising to grow almost 22 percent in 2009, while national paid search is expected to lose share, dropping from $12.4 million this year to $9.3 million next year.

Source: Kate Kaye, “Local Advertisers Are Glimmer of Hope for Web Ad Industry in Downturn”, The ClickZ Network, October 29, 2008

In August, eMarketer projected online advertising expenditure to grow by 16 percent between 2008 and 2009 - from $24.5 billion to $28.5 billion. Due to the current financial crisis and economic recession that have gripped, or are about to grip, many Western economies, eMarketer plans to revise downward its online ad spending prediction.

But while online spending may be more subdued in the coming year or so, eMarketer still expects it to grow significantly over the coming few years. This is due to seven (7) reasons that make the Internet an increasingly desirable advertising medium. The Internet:

1. Is more measurable and accountable than traditional channels.
2. Allows for better, more-granular targeting than other forms of media.
3. Is interactive, allowing for a higher degree of engagement with prospects and customers.
4. Accounts for more media time among various, particularly younger, consumers.
5. Taps into the ‘consumer-in-control movement’, enabling marketers to join consumers’ conversations.
6. Features web 2.0 phenomena such as blogs, social networks and Twitter that provide marketers with the ability to insight into consumer behavior and attitudes.
7. Allows marketers to reach prospects throughout the entire consumer buying cycle, from initial awareness, through pre-information-gathering, to purchase and post-sale support.

Source: Geoff Ramsey, “Online Ad Spending Will Keep Growing”, eMarketer, October 27, 2008

ClickZ reports that research by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers reveals a decline in the growth rate of online advertising expenditure.

In the first half of 2008, $11.5 billion was spent on online ads. While this constitutes an increase of over 15 percent over the same period in 2007, it’s much lower than the 37 percent increase in the first half of 2006 compared with 2005.

Also, while online ad spending in the second quarter of 2008 was 13 percent the second quarter of 2007, it was 0.3 percent lower than what it was in the first quarter of this year. In other words, online ad growth looks to be dipping.

Nevertheless, online spending was still significant in the first half of the year. Search engine ad spending (about 44 percent of all online ad spending) grew to $5.1 billion, up 24 percent over the initial half of 2007, while display spending (33 percent of all online ad spending) rose by 19 percent to $3.8 billion in the first half of this year.

Most display spending was devoted to banner ads (21 percent). The remainder was devoted to rich media (7 percent), video (3 percent) and sponsorships (2 percent). Meanwhile, spending on online classifieds decreased from 17 percent to 14 percent in the first half of the year and lead generation ad spending dropped from 8 percent to 7 percent of budgets. Email remained steady at 2 percent of online ad spending.

Finally, advertisers continue to embrace performance-based ad models. Performance-based ads, such as cost-per-click or cost-per-acquisition ads were up for 52 percent of ad spending in the first six months of this year, up from 50 percent in the first half of 2007. Meanwhile, CPM-based ad spending dropped slightly from 45 percent to 44 percent.

Source: Kate Kaye, “Online Ad Growth Declines in First Half 2008″, The ClickZ Network, October 7, 2008

Print advertising expenditure in the U.S. declined by 16 percent in the second quarter of 2008, dropping to $8.8 billion. According to Erick Schonfeld of TechCrunch, this marks the ninth consecutive quarter in which print revenues have declined, and at an-ever accelerating rate at that.

As a whole, the U.S. newspaper industry earned $1.7 billion LESS in print ad sales in the second quarter of 2008 than it earned in the second quarter of 2007. In terms of the first half of the year, the industry earned $3.1 billion less. In fact, revenue levels are down to 1995 levels.

To make matters worse, online newspaper ad sales were just $777 million in the second quarter, representing a decline of 2.4 percent compared with the year before.

TechCrunch points out that bundling print and online ad sales isn’t likely to be doing newspapers any favors. Advertisers used to buying bundles will typically drop the entire bundle when making budget cuts, rather than carve off print or online (as the case may be).

Actually, the bundling itself is surely another reason for lower revenues, since bundles typically involve a discount on the combined off-line and online offering.

Source: Erick Schonfeld, “Negative Momentum: Newspaper Ad Revenues Gaining Downhill Speed (Even Online Is Declining)”, TechCrunch, September 5, 2008