Online Ad Growth Grinds To A Halt

by Erick Schonfeld on November 16, 2008

We all know online advertising decelerated in the third quarter, but how bad was the slowdown overall? To find out, we added up the online advertising revenues for Google,Yahoo, Microsoft, and AOL, which together account for the majority of online advertising. In the third quarter, growth pretty much ground to a halt. The combined ad revenues of those four Web bellwethers eked out only 0.6 percent growth, quarter over quarter. That sequential growth rate was 12.7 percent in the fourth quarter of 2007, to 2.8 percent in the first quarter of 2008, and 1.1 percent in the second quarter (see chart above).

On an absolute basis, the combined ad revenues for all four companies during the third quarter increased by only $50 million to $8.2 billion. The year-over-year growth rate was still a healthy 18 percent, but those comparisons will likely flatten out as well starting in the fourth quarter.

For the purposes of this analysis, I took the total advertising revenues from both Google and Yahoo, including their network revenues paid to affiliates, the online revenues reported by Microsoft, and only the advertising portion of AOL’s revenues. There were other companies I could have added, but these four serve as good proxy for the overall online advertising market. Below are the absolute revenue numbers, broken down by company: