The Real Problem With Display: A Glut Of Inventory

imageDisplay ad revenues were down 25 percent for *AOL*, down two percent at *Yahoo*, and down so sharply at the *New York Times Co*. that it decided to focus About.com on a cost-per-click model in Q4. But don’t blame it all on the economy: the WSJ has a story today arguing that the cratering display market has actually been buckling under the weight of too much inventory for some time now, and the economy has just further diminished demand.

Even if the economy rebounds in 2009, it doesn’t look like the situation will improve because premium and mid-tier publishers are just creating too much content. When you add in the continuous stream of lower-quality user-generated content and social media inventory, the Journal says: “The Web is likely heading for a shakeout on a scale unseen since the dot.com bust.” More after the jump.

Well, at least the ad industry can feel good about the local online market, right? Not really. That slice of the market, which had been going strong last year, is starting to feel more of the pain, Business Week reports. The post piggybacks on Borrell Associates’ report from November that said there would be “little or no growth” in local online ad spending in 2009, and here’s how it shakes out: independent classifieds like Craigslist (which monetizes just one percent of its traffic) and review sites like Yelp will find it harder to maintain operations, local businesses will pull back on spending with third-party services like OpenTable, and, of course, local newspapers will continue to sink deeper into a hole.

If there’s one bright spot, it’s the fact that marketers are steadily increasing their online ad budgets at the expense of more traditional means. That pool of cash could fuel demand for both display and local online ads over time.

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