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 —Google had 1M advertisers in '07: So while that secret is out, you can only guess how many more advertisers Google (NSDQ: GOOG) has now. UBS analyst Ben Schachter speculates the search giant has between 1.3 million and 1.5 million advertisers at this point. Citing an SEC regulatory filing, NYT reported that Google said it had 1 million advertisers as of 2007. The numbers have grown steadily: from 89,000 in 2003, to 201,000 in 2004, 360,000 in 2005 and 600,000 in 2006. But what hasn't changed is is how much advertisers on Google have spent on average, which is just above $16,000 a year on Google, roughly the same as five years ago.
—Will delete Facebook friends for (fast) food: If you've got too many Facebook friends—people you've probably never even spoken to—but haven't had cause to delete them, Burger King has an impetus to clean out your list. Much in the same odd vein as its four-year-old Subservient Chicken web spot, Burger King will offer Facebook members a coupon for a free burger if they delete 10 friends. Only one coupon per user account, though.
—Despite the down economy, ad effectiveness is up: That's the Online Publishers Association's interpretation of a Dynamic Logic MarketNorms report (PDF). For example, since the first report in July, brand awareness on OPA member sites rose 38 percent, while scores on ad networks have declined 19 percent. Also, brand favorability scores for OPA member sites have risen 27 percent, while ad networks, portals and MarketNorms have dropped 29 percent, 17 percent and 6 percent respectively.
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Even though 2008 was a slower year for digital media M&A, about $0.88 of every dollar of industry revenue growth flew to four growth sectors: Database & Information; B2B Online Media; Consumer Online Media; and Interactive Marketing Services. Only $0.12 flowed to traditional media, according to an analysis by media M&A advisory firm The Jordan, Edmiston Group. This compares to $0.67 of every incremental ad dollar flowing to traditional media sectors (newspapers, magazines, events, etc.) from 2001 to 2007, while only $0.33 went to these four growth sectors.
Some other highlights:
—Multiples: The all-important metric for an entrepreneur: The four growth categories saw average revenue and EBITDA multiples range from 3.4x to 4.5x and 13.5x to 21.3x, respectively, in 2008, as compared to 1.5x to 2.4x and 8.0x to 8.5x, respectively, for traditional media sectors.
—Deal numbers: Deal count and value declined 35 percent and 58 percent, respectively, in Q4 2008 versus Q4 2007. For the full-year, deal count was down 13 percent and deal value declined a significant 68 percent from 2007 highs.
Average M&A Multiples in Media/Info Sector in 2008:
Full Disclosure: JEGI has been a sponsor of ContentNext.
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It's not surprising that during a downturn, the clear metrics and ROI offered by performance based ads are looking more attractive. But in his wide-ranging '09 outlook, JP Morgan analyst Imran Khans expects marketers to treasure performance-based ads even when the larger economy begins to grow again. So the market share gains performance ad have achieved over the CPM-based look pretty durable and mean continued struggles for display ads.
The report, Nothing But Net: Outlook for Global Internet Stocks in 2009 (PDF), predicts that the mostly performance-based U.S. search ad market will rise 10 percent in 2009 to nearly $16 billion. In contrast, display ads, which includes both performance and branded advertising, will grow only 6.3 percent to $8.4 billion this year.
—Bearish online video: Khan expects the accelerated shift to performance ads having a dampening effect on the growth of online video ads. Even in a series of downward revisions, online video ad growth still seemed poised for healthy gains this year. For example, at the end of November, eMarketer forecast online video growth of 44.9 percent, which was still nearly half of the 81 percent growth rate the researcher predicted for 2008. Khan believes that online video is headed for a considerable slowdown because one, it's still reliant on the CPM model, as opposed to performance-based measurements like cost-per-click or cost-per-action based display. And unlike television, which still can count on advertisers to respond to CPMs, online video can't guarantee viewership for any specific video the way TV does in the upfront model. Plus, considering the unpredictability of popular videos, they uneven quality and the continued battles over copyright, JP Morgan doesn't expect online video to have great prospects for the next few years. However, Khan is intrigued by Google's experiments with an e-commerce platform—i.e, performance-based model—for YouTube videos. For example, if a user watches a a song featured in a music
video, they can click on a link that lets them buy music directly Amazon (NSDQ: AMZN) and iTunes, with YouTube getting a cut of the revenue. More after the jump —Social nets need new approach: Looking at the projected slump in online ad sales for sites like Facebook and MySpace, JP Morgan strongly advises that online communities look for sources other than display for revenue. In particular, the report offers a few possible routes to profitability, including greater use of cost-per-action ads, lead gen, sales of virtual items, connecting to classifieds or e-commerce sites, and charging for premium membership, as LinkedIn and Classmates do.
—Mobile looks good long-term: But as for the near-term, the long-awaited explosion for mobile ads will simply have to wait for a better economic environment—not to mention better phones and technology, Khan says. although mobile phone penetration is high at 84 percent in the U.S., , the mobile search market is in the early adoption stage. In Q108, only 15.6 percent of wireless subs were using mobile web, according to Nielsen Mobile data. Even within this small subset of mobile internet users, usage drastically trails that on PCs. Nielsen Online says that a PC online user visits more than 100 domains per month, whereas mobile web users visit 6.4 individual sites per month, on average.
—M&As start slow, but gather steam in H209: With last year's total deal count down by 20 percent, according to a report last week from DeSilva + Phillips (disclosure: one of our sponsors), JP Morgan anticipates continued coolness in the acquisitions area for at least the first six months of 2009. But things are likely to heat up in the second half of the year, assuming the economy begins to stabilize.
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 —CBS makes NYT's front page (in an ad): Trying to stave of further ad revenue declines, the NYT has accepted its first display ad on the front page of the print edition from CBS (NYSE: CBS). The ad, which is two-and-a-half inches high, runs below the fold across the bottom of the page. The NYT did not disclose rates for ads on the front page. The decision to open up the front page to ads was paved last year, when NYTimes.com began running ads on the home page.
—Despite default dangers, Lee maintains healthy op profit: The Davenport, Iowa publisher may have just ended '08 with an $879 million net income loss, but Alan D. Mutter says Lee "still produces a larger operating profit, percentage-wise, than Exxon." While Lee remains "reasonably robust," it's not as strong as it used to be and it might not be strong enough to pay the $142.5 million debt payment due this spring.
—Cincinnati Enq. cuts back on classifieds: Facing the difficult reality of less and less help wanteds, real estate and auto ads, the Gannett (NYSE: GCI) paper will cease publishing print classifieds on Mondays and Wednesdays. And as an additional way to reduce newsprint and ink costs, The Cincinnati Enquirer will shrink its page format and condense some of it sections. The moves follow a second round of layoffs at the paper this month and the word that Gannett's Detroit Free Press and its partner, The Detroit News, are scaling back on home delivery.
—Hoy New York goes web-only: Print troubles aren't limited to the general market newspapers. Free Spanish-language daily Hoy New York is going web-only just before the end of 2008. The shuttering of the print version resulted in 16 layoffs. Hoy was sold by Tribune Company to ImpreMedia in Feb. 2007.
—Web overtakes print as news source: But TV is still way ahead of both mediums when it comes to news consumption, according to a report (PDF) from the Pew Research Center for The People and The Press. About 40 percent of 1,013 people surveyed by Pew late last month said they get most of their national and international news from the internet, up from just 24 percent in September 2007. For the first time in a Pew survey, more people say they relied more on the web for news than newspapers (35%), while TV remains way ahead at 70 percent. While Pew refers to "newspapers" in its survey, it's clear that respondents are talking about print, but it doesn't mean that "online newspapers" are losing ground against other formats.
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 The percentage of internet users who bought a CD in Q3 fell to 22 percent from 25 percent last year, according to an online survey by market researcher NPD. Oddly enough, that's still better than the 15 percent of web users who paid for a music download last quarter. Both figures show why overall demand for music by internet users was down 2 percent in Q3.
—Online grows, albeit slowly: To be fair, online is at least still growing, while physical purchases are still tanking. The slightly wider use of online music stores like iTunes and Amazon's provided a small boost to the category over last year In Q307, 13 percent of the internet population bought music from a download store, meaning a 2 percent increase in the growth rate. In general legal music download volumes grew by 29 percent in Q3.
—P2P still a favorite: The number of Internet users sharing music on P2P sites held steady at 14 percent in Q3. However the volume of music shared via P2P sites grew by 23 percent, as P2P users reported downloading more files. Teens purchased 34 percent more paid digital downloads compared with year-ago. The growth in P2P file downloading was acute among 13- to 17-year-olds—up 46 percent. NPD pointed out that sharing files by burning music to a CD fell 25 percent among teens, suggesting that physical discs hold little appeal even when it's being given away for free.
—Thanks to Rock Band: NPD's survey of 4,400 online users in Q3 also found that 22 percent of music buyers (including CDs, digital or mobile) overall played a music-related video game, such as Rock Band or Guitar Hero, indicating that video gaming may be the one hope for the music to try to make some money from a deeply troubled business. Release
Photo Credit: Neeku
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Another day, another ad spend downgrade… Online advertising will grow a paltry 6.1 percent to $25.1 billion next year, says Barclays Capital internet analyst Doug Anmuth, in his latest significant downward revision. It was only October when he predicted that web ad dollars would grow 16.9 percent. That was revised down from May's expectation of 23.4 percent. But as a commenter said on an earlier ad spend outlook, some growth is better than none. Putting things into perspective, the U.S. total ad spending looks to plummet 10 percent to $252.1 billion, Anmuth now says, altering his previous -5.5 percent projection.
Separately, Nielsen released preliminary figures for the first three quarters of 2008 and found that online display ads fell 5.6 percent on an ad decline of 0.6 percent for the period. (Nielsen's release is here)
Looking to the close of 2008, this year's online ad spend is expected to rise 11.4 percent to $23.6 billion, Anmuth estimates. Earlier this fall, Anmuth had anticipated '08's online take to rise 16.9 percent to $24.79 billion. Back in May, Anmuth predicted online revenue gain of 23.4 percent. As for the good news, that will have to wait until 2010, when Anmuth says internet ads should reaccelerate to 12 percent, reaching $28.1 billion. Anmuth's '09 forecast is in line with some other prognosticators' views from this month:
—Magna Global's Bob Coen has downgraded his '09 forecast for U.S. online ad spend to 8 percent growth from his earlier call this summer for web ad dollars to rise 12 percent.
—WPP's GroupM expects 5 percent online ad growth in '09, way down from GroupM's expectation for 16 percent gains this year. Worldwide, internet ad growth is predicted to slow from 22 percent in 2008 to 10 percent in '09.
—ZenithOptimedia, sticking to the bullish end of the spectrum, is forecasting online ad growth of 18 percent—both for worldwide and North America—next year. As for this year, 21.2 percent online ad spending growth.
—eMarketer, in its revised forecast at the end of November, dramatically lowered its 2009 online ad spending projections to only 8.9 percent growth, compared to the 14.5 percent gains it estimated in August. eMarketer anticipates online ads to rise 11.3 percent to $23.6 billion for '08. More after the jump. —Getting back to Anmuth's online outlook, the Barclays analyst is seeing anemic 4 percent growth in display, while search still remains surprisingly strong with 20 percent gains. That is rounded out by further weakness in the "Auctions and Other" category, which is slated to drop 2 percent. Lead gen and e-mail marketing is tracking the overall internet space and should be up only 5 percent.
—As for his rosier 2010 forecast, Anmuth is calling for a comeback for display (12 percent growth), a slowdown in search (up 15 percent), a rebound in "auctions and other" (5 percent gains) , and a slight uptick for lead generation and e-mail (climbing 6 percent).
Turning to traditional media, the signs are expectedly dark:
—Newspapers: Barclays is cutting its '09 and 2010 newspaper ad revenue forecast to -17 percent and -7.5 percent, respectively, vs. the investment back's prior '09 estimate as of one month ago, when it said newspapers would be down 14 percent and down 12 percent . Specifically, in '09, newspapers will likely see retail ads fall 11 percent, national down 17.6 percent, and classified down 27.9 percent. Within the classifieds category, next year help wanteds will crater 44.7 percent, auto ads will plunge 37.5 percent, and real estate drop 28.8 percent. In 2010, things are not expected to feel much better for newspapers: retail (-5 percent), national (-7 percent), and classified (-13.5 percent, with help wanteds sinking 15 percent, auto ads sliding 12.5 percent, and real estate dropping 12.5 percent).
—Cable: Although cable is considered relatively strong, Barclays is also pulling back on its earlier call for '09 and 2010. Cable ad revenue will fall 3 percent next year and then rise again to 5 percent in 2010. Previously, Barclays estimated revenue growth of 1.8 percent for '09.
—TV networks: Broadcast ad estimates for '09 and 2010 will fall 10.0 percent in '09 and head upward 3.0 percent, respectively. Barclays previously estimated an 8.0 percent drop next year.
—Magazines: Magazine ads will decrease 15 percent next year, a slight change from Barclays' earlier expectation of a 12.5 percent drop. The analyst report anticipates magazine ad dollars retreating 5 percent in 2010.
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-- MediaNews' debt rating lowered on ad declines: Moody's Investors Service has downgraded MediaNews Group's credit rating to junk status. The credit rating agency fears the worsening economic climate will squeeze the publisher of The Denver Post and about 50 other newspapers even tighter. The ratings action affects $962 million worth of debt. Also, MediaNews CEO Dean Singleton is rejecting E&P's contention that the company is approaching the kind of leverage that led Tribune Company to seek bankruptcy protection this week. The main difference is that most of its debt is held by Hearst, which also has a stake in the company.
-- Gannett's Detroit papers may cut back home delivery: The publisher of Gannett's Detroit Free Press and its partner, The Detroit News, may stop home delivery except on Thursday, Friday and Sunday, the most lucrative days for advertisers. The decision is expected to be made next week. With more readers dropping print for the web and circulation revenues trending downward, the move is considered a good way to get costs in line, after a year of deep layoffs and other cutbacks.
-- NAA forecast "too optimistic": That's the view from J.P. Morgan media analyst Alexia Quadrani, who tells Fitz&Jen that newspaper ad spend will drop 14- to 16 percent next year. She considers the National Newspaper Association's revised -9.7 percent drop too sanguine. NAA, which now expects no growth for online newspaper ads next year, had previously forecast total newspaper revenues coming in -5.5 percent. The organization's last forecast called for papers' web ad dollars to rise 5 percent in '09.
-- NYT wage freeze for '09: Given all the layoffs in the newspaper industry lately, the news could be worse for NYT staffers. Both print and web employees were told that due to weak advertising across the board, there would be no pay increases next year.
Photo Credit: Lusi
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Growth trends for display ads have been shrinking since late last year, and through September, the category was up only 7 percent, TNS Media Intelligence data shows. That's less than half of the 17.2 percent gain TNS recorded last year. As TNS points out, growth rates have shrunk for the past five straight quarters. The TNS numbers obviously don't tell the whole online-ad-spend story, since its data still excludes paid search.
TNS' release comes after the major ad companies released their latest forecasts, including Magna Global's Bob Coen, who downgraded his 2008 forecast for U.S. online ad spend to 8 percent growth (5 percent gain expected in '09); ZenithOptimedia (which cut its global online spending forecast to 21.2 percent this year) and GroupM (which projected 10 percent global gains for '08 and 5 percent in '09). ZenithOptimedia remains the most optimistic for global online ad growth, projecting a 21.2 percent rise for the world's web ad dollars this year and 18 percent next.
-- What Olympics boost?: You didn't need the official word to tell you we were in a recession for the past year and so, and the 1.7 percent drop in total ad spend isn't much of a shock either. But it does show how things have deteriorated, and that even display looks healthy by comparison. Still, considering all the hype and hope surrounding how much the Summer Olympics was supposed to contribute—$2 billion in total spending was the general consensus—Q3 ad expenditures were off 2 percent versus last year. That said, the Olympics did save network TV from entering negative territory, as the category was up 3 percent. Looking ahead, Jon Swallen, SVP Research at TNS Media Intelligence, said in a statement that Q4 is showing signs of further "slackening" in the ad market.
-- Print's troubles: The Olympics may have masked TV's ad woes, but magazines and newspapers had no refuge from the downturn. While mags' ad dollars slipped 3.8 percent, newspapers plunged a staggering 10 percent during the Jan.-Sept. period. Release
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Magna Global's Bob Coen has downgraded his forecast for U.S. online ad spend to 8 percent growth from his earlier call this summer's for web ad dollars to rise 12 percent. At this point, it looks like 2009 growth in online will slow significantly, rising only 5 percent, he said. Coen made his forecast at the UBS Global Media and Communications (PDF) conference alongside execs from ZenithOptimedia (which cut its global online spending forecast to 21.2 percent this year) and GroupM (which projected 22 percent gains for '08). Last year at the same conference, Coen predicted a 16.5 percent rise in internet ad revenues over 2007.
While online certainly looks considerably stronger than the rest of the ad market—he forecasts a 3.2 percent decline for total ad spending for this year, much more bearish than the 0.2 percent drop expected by Zenith and GroupM—Coen doesn't have much more confidence in online. In his presentation he said, "Aside from search, which is still fairly robust, the online ad space doesn't look much different from the total market. It will be a tough year for everyone." Specifically, for 2009, Magna anticipates that total U.S. ad spend will be down 4.5 percent. Release (PDF)
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While WPP's GroupM agrees precisely with rival media shop ZenithOptimedia that the world's ad spend will be down 0.2 percent next year, it is taking a significantly more bearish view when it comes to online. GroupM's dismal forecast, which will be unveiled at this morning on a panel with Zenith and Interpublic Group's Magna at UBS Global Media and Communications (PDF) conference in New York, points out that the web is the only area experiencing real growth. The media agency projects 5 percent online ad growth in '09, way down from GroupM's expectation for 16 percent gains this year. The U.K. will mirror the U.S. with rates of 4 percent growth next year compared to 22 percent in 2008. Back in August, , GroupM had forecast U.S. online ad spend to rise 14.7 percent this year. GroupM's downward revision follows eMarketers' downgraded forecast for online ads in '09 last month, saying it now believes spending will grow only 8.9 percent, compared to the 14.5 percent increase it saw in August.
Worldwide, internet ad growth is predicted to slow from 22 percent in 2008 to 10 percent in '09, representing $5 billion growth to reach $59 billion or 13 percent of measured media investment, GroupM Futures Director Adam Smith said in a statement. "We do not expect an ad collapse in 2009, but nor do we expect the sudden improvement of the last two cycles," Smith said, adding that lower gas prices and other costs associated with materials, potentially freeing up more marketing dollars. At least that's the hope.
We'll have coverage of the panel, including Magna's ad spend predictions, later this morning from the UBS MediaWeek conference.
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The recession's squeeze has pushed ZenithOptimedia's bullish outlook for online ad spending downward a bit, as the Publicis Groupe media shop is predicting global online ad revenues to rise 21.2 percent this year and about 18 percent in 2009. The company will present its forecast on a panel at the UBS Global Media and Communications (PDF) conference in New York this morning, on a panel with Interpublic Group's Magna and WPP's GroupM.
This year's forecast is down a quite bit from Zenith's expectation in June for global internet ad spend to grow 26.7 percent this year. Still, considering that Zenith sees the globe's total ad market sinking into negative territory with a 0.2 percent decline, online is still relatively strong. In North America, Zenith is calling for internet advertising to rise 18 percent as well, with Western Europe lagging with only 12 percent gains this year. With next year looking very uncertain, Zenith is projecting 17.9 percent growth. With hope for an economic comeback not likely to happen before 2010, Zenith is calling for 21.3 percent gain. Beyond that, Zenith's online forecast has the internet taking a 15.6 percent share of global ad dollars in 2011, 5.2 percentage points ahead of magazines and 5.6 points behind newspapers, after having narrowed the gap from 15.1 points in 2008.
We'll have GroupM's latest forecast here at at 5 AM PT, as well as coverage of Magna's ad spend predictions later this morning at the UBS MediaWeek conference
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The current ad recession could extend past 2009 and closely resemble the period during the 2001 downturn, when revenues were down 6- 9 percent in real terms, according to credit rater Fitch's latest media forecast (free registration req.) However, there is one big difference between then and now that might mask the pain somewhat. Seven years ago, when advertising revs plunged, the industry was coming off three years of annual gains ranging from 8- to 11 percent, mostly driven by the dot-com bubble. Since coming back from the dark days of '01, the industry's growth has been fairly restrained.
-- Online to keep its head above water: Despite the overall gloom, Fitch's outlook for online revenues are stable, expecting single digit increases. That revenue growth picture is in line with other forecasters like eMarketer, which nearly halved its growth rate estimate for 2009 to 8.9 percent from 14.5 percent call back in August. In general, CPM growth will cool, though individual segments like online video and social nets are likely to continue growing. Over the long term, Fitch anticipates online ad growth to rebound from economic weakness and continue to capture share from traditional outlets.
-- Newspaper extinction in some cities?: It's hard to come up with a new way to express how bad newspapers have got it, but Fitch has one possible bomb to drop: in addition to predicting newspapers to see more defaults, be shut down and liquidated next year, several cities could go without a daily print newspaper by 2010. Overall, newspaper industry revenue growth will be negative for the foreseeable future, the credit rater says.
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US digital music sales will grow by 17 percent per year on average over the next five years, to make up 41 percent of sales by 2013, Forrester's latest Jupiterresearch forecast says. But that won't stop overall sales shrinking by 0.8 percent per year on average from $10.2 billion to $9.8 billion. To blame - sticking points in the digital world and an acceleration in CDs' decline, their forecast revised from a 7.1 percent annual drop to 8.7 percent following poor 2007 CD sales. Other projections…
-- Phones trump media players: The number of MP3-capable phones will grow from today's 53 million to 240 million, or 75 percent of the US, by 2013, significantly hitting demand for unconnected media devices, which will plateau at 41 percent of the population.
-- Subscriptions stutter: So much for the great white hope. While the number of digital music consumers is forecast to grow from this year's 58.7 million to 174.1 million or $3.5 billion by 2013 (55 percent of US online users), those taking music subscriptions will creep from just 2.7 million to 4.8 million.
-- Casual spenders: Per-user music spend is expected to shrink as more consumers will be phone users, reckoned to be only casual spenders.
-- DRM-free, so what?: Only 24 percent of music buyers said DRM-free would entice them to buy more digital tracks (though it's possible some are merely unaware what DRM even is).
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Here we go again ... Citing severe deterioration in the economy, eMarketer has dramatically reduced its 2009 online ad spending projections to only 8.9 percent growth, compared to the 14.5 percent gains it estimated in August. The revision was prompted by the latest Interactive Advertising Bureau and PricewaterhouseCoopers tally of online ad spending, which said last week that web-based advertising grew 11 percent in Q3 to $5.9 billion. And so, eMarketer now expects online ad spend to hit $25.7 billion next year, while it anticipates 2008 to finish up with $23.6 billion.
-- Slow recovery in 2010: The researcher's downward revision also notes that recovery will not snap back within the next four years. In 2010, online ad spending growth will return (just barely) into the double digits at 10.9 percent, and in 2013 it will hit 13.5 percent. And paid search, which has been considered the most resilient online ad format, will see a mere 21.4 percent rise in 2008 expenditures. Video will also lose some steam; growth is expected to be strong this year, rising 81 percent, but those rates will drop almost in half next year, when the increase will be 44.9 percent. As for display, it will be up a meager 3.9 percent in 2008 and 6.6 percent in 2010. Release
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Considering the economic meltdown of the past few weeks, the fact that online ad revenues grew 11 percent in Q3 would seem to be reason to celebrate. But comparing the latest figures from the Interactive Advertising Bureau to its Q307 report shows how much growth has slowed. While online ad spending approached $5.9 billion this past quarter, in Q307, when the IAB said revenues hit $5.2 billion, it had gained 25.3 percent over the prior year. Although online ad dollars had already been slowing last year consider the difference from Q306, when web-based advertising was up 33 percent.
Flat revenues: Compared to the other two quarters this year, online ad spending is dead flat, said the report, which the IAB partnered with PriceWaterhouseCoopers on. For example, in Q2, online ad dollars climbed 12.8 percent. Looking at the first nine months of the year at least, revenues totaled $17.3 billion, up from $15.2 billion in the same period a year ago, for a 13.8 percent gain. Again, for the sake of perspective, in Q307, the IAB reported that the first nine months of the year grew 26 percent year-over-year.
Click to enlarge:
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