Why The Latest Online Ad Figures May Be Misleading

The overall panic that has taken hold of the financial markets made its way to online advertising yesterday with the release of the Interactive Advertising Bureau’s third-quarter online ad figures: online advertising up only 2% quarter-to-quarter and 11% year-over-year. But before you scramble to lower all of your estimates once again, keep in mind that the third quarter and October are likely to have been skewed heavily by the elections. While I wouldn’t suggest that online behaves completely like TV, it is a long-known fact that political advertising crowds out other advertisers and tends to put pressure on pricing.

The general news and political sites have enjoyed a run-up in traffic (with questions as to its sustainability post election) that created enormous ad inventory. Economic theory will tell you that an increase in supply (i.e. ad inventory) coupled with unchanged, or even lessened demand (i.e. advertisers) can only be cleared by lower pricing. While I’m not feeling particularly optimistic about anything right now, I would caution the market to hold back on drawing any conclusions about online ad pricing or ad trends until we get past the election season. While trends are likely still weakening, the bottom is far from falling out.

Lauren Rich Fine is ContentNext’s research director

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