Online Ad Spend a Sign of a U.S. Recession?

Wednesday, April 9th, 2008 by Andy Beal

Online Ad Spend a Sign of a U.S. Recession?

I’d like to ask you a question.

Does the growth of online advertising spend in the U.K. versus the U.S. confirm that our economy is in/heading for a recession?

According to a new study (via ClickZ) internet ad spend in the U.K. grew by 39% in 2007. In contrast, internet ad spend in the U.S. grew by just 25%–still impressive, but way behind our English cousins.

I know what you’re thinking. The online advertising channel in the U.K. must be immature compared to America–after all, they only spent $5.5 billion compared to our country’s $21.1 billion.

In reply, I’d point out the spending on a per capita basis (I know Jordan will be proud of me):

U.K. online ad spend = $90 per capita (total U.K. population approx. 61 million)
U.S. online ad spend = $70 per capita (total U.S. population approx. 300 million)

So, the British appear to be spending more per person and their spend is out-growing ours.

Can we use this as a measure of the health of our economy. After all, online ad spending is some of the most effective and measurable marketing–if U.S. companies are pulling back budgets here, what else are they cutting back on?

OK, over to you. What do you think?

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13 comments on “Online Ad Spend a Sign of a U.S. Recession?”

Search Engine Optimization Journal Says:

April 9th, 2008 at 11:12 am

This among many things is a sign of a possible recession. Advertising budgets are the first to go in many businesses… There’s no denying that our economy is definitely roughing it right now.
Web Browser Says:

April 9th, 2008 at 2:08 pm

Um…

If it increaseses by 10 from 100 to 110, it’s 10% increase.
If it increases by 11 from 110, it’s ~9%…

Hope you got the idea.
Andy Beal Says:

April 9th, 2008 at 2:25 pm

@Web B – what are you referring to?
Robert Kingston Says:

April 9th, 2008 at 6:05 pm

That depends.

Is the Ad Spend focussed on the US market or are US advertisers reaching outside the US into international markets where people aren’t in a recession.

I know for a fact that here in Australia, our dollar is almost worth as much as the USD these days. That makes it cheaper for us to buy from the US than it does from our own country – yep, even with shipping included.
Robert Kingston Says:

April 9th, 2008 at 6:07 pm

Ps. I was writing in reply to the question in the post: Can we use this as a measure of the health of our economy?
Michelle Greer Says:

April 10th, 2008 at 1:42 am

Isn’t gas in England around $7 per gallon? They charge by the liter there. If I had to pay that, I’d buy a lot more online too.
Elections guy Says:

April 10th, 2008 at 3:55 am

This only means that America’s market is tight now.
Chandra Mohan Says:

April 10th, 2008 at 5:43 am

The US is, by all measures in for deep trouble in the coming days & months. But the powers that be resent to either accept it or take corrective action.
Stefanie Says:

April 10th, 2008 at 7:36 am

I’d want to see more examples before thinking of it as a good indicator. A lot of things are more expensive in the UK, so it makes sense that online ads might be, also.

Maybe UK businesses are just faster to adapt to online methods. Maybe they have more computer users per capita. I really don’t know.
Alfonso Guerra Says:

April 10th, 2008 at 12:38 pm

The currency normally used in the UK isn’t the dollar, so the figures are completely inaccurate due to currency exchange rate fluctuations.

Present the figures for the online ad spending in pounds, and we’ll have a more accurate picture for the relative health of the US market.
Andy Beal Says:

April 10th, 2008 at 12:59 pm

@Alfonso – it doesn’t fluctuate that much.
Alfonso Guerra Says:

April 10th, 2008 at 2:46 pm

http://www.x-rates.com/d/USD/GBP/graph120.html

That looks rock steady to you?

It looks like you’re just trying to find data that substantiates your beliefs rather than accepting the data you see.
Andy Beal Says:

April 10th, 2008 at 4:06 pm

@Aflonso – yeah, averages about $2 to the pound over past 120 days.

Back at ya!
http://www.x-rates.com/d/USD/GBP/hist2008.html

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