Q2: Online Ads Failed the Recession Test; Was It Because of Dumb Clients?

Last Updated Jul 26, 2009 8:45 PM EDT

With Yahoo reporting revenues down 13 percent in Q2 2009 and Google recording a rise of just 3 percent, it's worth asking ... why?

The recession, duh. But it's less obvious than that. As late as last November, web-based ad agencies were reporting revenue rises. BNET advanced the argument that web advertising might skate through the recession unscathed.

That turned out to be wrong, as Q4 showed that web advertising behaved the same way as offline advertising does: Clients pull their money in hard times.

That does not bode well for ValueClick's Q2 2009 results, due in eary August.

But why did clients pull their money from the web? In theory, when clients are faced with cuts from the corporate finance office it makes sense to remove budgets from expensive, old, unmeasurable media and either preserve or increase budgets in cheap, new, measurable online forms -- as long as the aggregate budget declines.

Clients didn't do this. Instead, they seem to have taken the ax to everything, as if it were easier to calculate an across-the-board 10 percent cut rather than sit down with the spreadsheet and figure out what was more productive.

BNET asked Zephrin Lasker, CEO of online lead-generation Pontiflex (clients include Kimberly-Clark, Blockbuster and the Obama Campaign), what he thought was going on. He said:

There's culling across the board and it's completely indiscriminate.
So much media buying is on a relationship basis despite the automation.
To conclude: The recession has been a key test for online advertising, a test in which the sector should have been able to demonstrate its efficiencies over traditional media. But for some reason, the sector has failed. Whether this is because clients couldn't be bothered to make tough choices or because the medium itself just isn't effective enough yet, is another story.