The slowing economy is starting to hurt an unexpected segment of the advertising world: the Web, which has been growing fast for half a decade.
Once thought to be immune from cutbacks, online advertising -- especially at Web portals and information sites such as those run by newspapers -- is experiencing a slowdown as marketers tighten their belts and make tough decisions about where to spend their leaner budgets. A host of those companies recently reported slowing growth that's expected to linger through 2008.
Complaining about an online-ad slowdown is like griping about a slugger who is on pace for 40 home runs after hitting 50 last year, said David Hallerman, an analyst with EMarketer Inc. His firm expects spending on such ads to grow to $25.9 billion this year, from $21.1 billion last year, and hit $30 billion in 2009.
Online advertising is "not going to grow as much as expected, but it's still going to be growing more than other media," Hallerman said.
Some types will be hit harder than others. Although search-engine advertising, which constituted 41% of all online ad revenue last year, should remain strong, analysts say, marketers are likely to cut back on banners and other flashy display ads.
"Advertisers have pulled back in a pretty meaningful way, and display is feeling the brunt of it," said Clay Moran, a Stanford Group analyst who recently wrote a research report called "Online Advertising: caution required."
In recent weeks:
* Yahoo Inc. Chief Executive Jerry Yang told analysts that demand for display advertising was "softening."
* Online publisher Tech Target Inc. lowered its third-quarter forecast, blaming "macroeconomic weakness in the U.S. and its impact on advertising spending."
* Lending site Bankrate Inc. cut its 2008 guidance. CEO Thomas Evans explained that the company had "continued to experience softness in display advertising from several of our largest financial advertisers."
* Ad network ValueClick Inc., based in Westlake Village, blamed the economy for a slowdown in display advertising, which led to a 6% drop in its second-quarter profit.
Analysts say companies tend to cut back first on display advertising, which generated 21% of online ad revenue in 2007, because they see it as a way to improve their image rather than generate direct sales as search ads do.
