Q4: Web Ad Economy Enters Recession; Display Ad Prices Decline

(MoneyWatch)  Pubmatic's survey of online advertising prices shows that the web advertising economy entered recession in the fourth quarter of 2008. Prices for display ads online declined in Q4, the company reported. In addition, there was:

a significant decline in Q4 2008 online display ad pricing compared to Q4 2007 for all sizes of websites and all vertical categories, underscoring the fact that the US economy is in a recession and that the online advertising sector is not immune to it.

Here are the key points:

• All sizes of websites (small, medium, and large) were down dramatically from Q4 2007; small, medium, and large sites dropped 52%, 23%, and 54%, respectively, from the previous year.
• All sizes of websites were also down from Q3 2008 to Q4 2008, but the drops were not significant, bucking the trend of larger drops from quarter to quarter throughout 2008; this may be an indicator that the online ad sector got just enough of a boost from holiday advertising to keep ad rates steady.
• Similar to sites by size, all vertical categories also experienced significant drops in their ad pricing from Q4 2007; the biggest drop by a vertical was Business & Finance, which fell from an average price of $2.13 in Q4 2007 to $0.83 in Q4 2008 - a 61% drop.
• Also similar to sites by size, no vertical categories dropped by a significant amount from Q3 2008 to Q4 2008, and some verticals even improved from the previous quarter; the Technology, Sports, Entertainment, Gaming, and Music verticals all had higher ad price averages in Q4 of 2008 than in Q3 of 2008.

Rajeev Goel, CEO of PubMatic, was somewhat upbeat:

Online ad pricing is a reflection of what is happening in the overall economy, and as a result, pricing has dropped significantly in almost all categories in the past year.

However, with overall advertising budgets shrinking, the need for marketers to have more accountable advertising could bring more advertising dollars online in 2009 and start an upward trend as some vertical categories have already experienced."

Download the full report here.

BNET's previous coverage of the web ad economy:

• Q3: As Traditional Ad Economy Sinks, Web Ads Still in Growth Mode
• Web Ad Economy Faces Recession -- Possibly
• Q&A: ValueClick's Ardis on Where Client Money Is Going