Analysts Change Tune on Web Ad Economics

CNET’s Stephen Shankland brought us an interesting article today on the projections of search advertising spend.

Many have speculated that the weakened economic state could be a boon to the Internet sector, as businesses look for more cost effective marketing, and consumers look for better prices on goods.

However some analysts disagree.

Cowen analysts Jim Friedland and Kevin Kopelman stated:

“We are lowering our estimates on Google, Yahoo, Amazon, VistaPrint, eHealth, Blue Nile, and Gmarket to reflect: (1) a weaker macro outlook exacerbated by the bank crisis; (2) the rapid rise in the dollar over the past two months; and (3) the impact of the (0.5 percent) rate cut on interest income. We continue to believe that paid search-ad budgets will remain intact, based on our previously published analysis on the historical experience of direct-mail budgets during recessions. However, we think the growth of paid-search budgets–and therefore Google’s revenues–will be lower than expected, as smaller overall ad budgets will limit the ability of advertisers to meaningfully increase search spend. We also believe that display advertising could experience negative growth (we are projecting mid-single-digit growth in 2009), which would weigh heavily on Yahoo.”

The forecast here is not dismal.

Analysts aren’t forecasting cuts in search advertising budgets, but they also aren’t forecasting increases in these budgets. This is a notable change in perspective that has meaning beyond Google and Yahoo stock prices.

As marketers we should take note that the current economic instability could have an effect on our market place and we should plan accordingly.

  • http://www.zurpit.com Zurpit

    Im sure advertising online will be affected, since its affecting everyone it will probably get lower

  • http://www.greatpriceshere.com Nicole Price

    This is a classic method of committing to nothing. Why could they have not simply said, let us wait and watch!

    Nicole Price’s last blog post..Mobile Accessories

  • http://www.permaculture.co.za Jacques Snyman

    Hmmm….methinks that they must realise, for starters, that dollar strength is going to be eroded quickly….

  • http://thisismyurl.com Christopher Ross

    The online world will feel the realities of the stock market but on the other hand, this will be no different that the recession during the early 1990′s. Those of us who are looking will find some great deals and be able to take advantage of wonderful openings.

    Christopher Ross’s last blog post..Blog Round Up – October 16th

  • http://www.dylandarling.com Dylan Darling

    Of course the online world is going to feel this economic crunch, but we all have to keep living our lives. Advertising budgets are being cut, and revenues will most likely be down for online businesses. But we will all survive and thrive once again.

  • http://www.downloadic.com Downloadic

    its 100 percent that advertising online will be affected…