Online ad growth slows in Q3

Internet advertising revenue reached $5.9 billion during the third quarter of 2008. That’s the second-highest number ever, but quarter-to-quarter growth is slowing, according a new report from the Interactive Advertising Bureau and PricewaterhouseCoopers.

These numbers lend support to the last few months’ speculation that online ad numbers are about to fall off a cliff. Gawker Media owner Nick Denton offered perhaps the most pessimistic take, saying businesses should prepare for a 40 percent drop in advertising spending. But he’s hardly the only one who thinks ad-driven businesses will be hit hard next year. (Denton seems to be taking his own advice, first by announcing layoffs, then by folding tech gossip blog Valleywag into Gawker.)

It’s too early to know how bad things will get. Ad revenues total $17.3 billion for the year to date, up from $15.2 billion from the same period last year, but IAB’s chart is pretty sobering — it shows steady growth since 2004 or so, until you get to 2008, when things suddenly flatten out. I don’t think anyone will be surprised to see the numbers fall in Q4.

The biggest cause for hope, as the report notes, is that companies will still make room for performance-based ads in their budgets, because they know they’re getting value for their money. Anyone planning for revenue from big display ads, on the other hand, has already started rewriting their business plan (I hope).


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