A new report shows spending on Internet advertising grew at a double-digit rate during the first half of 2008, but that pace of growth trend isn’t expected to continue into 2009 — particularly among companies in the real estate and mortgage lending business.
Internet advertising revenue grew 15.2 percent during the first half of 2008, to $11.5 billion, according to research by PricewaterhouseCoopers LLP. Internet advertising revenue declined slightly between the first and second quarter, however, from $5.8 billion to $5.7 billion.
That could suggest harder times to come. But the 0.3 percent drop between quarters partly reflects cyclical advertising trends, said Randall Rothenberg, president and chief executive officer of the Interactive Advertising Bureau, which sponsored the report.
Industries that accounted for a greater share of Internet ad spending in the first half of 2008 included computing, automotive, telecommunications and consumer packaged goods. Advertisers that accounted for a smaller percentage of total revenues included retail, financial services, leisure travel, media and entertainment companies.
PricewaterhouseCoopers categorized real estate companies with retail businesses, which accounted for 21 percent of online ad revenue in the first half of the year, down from 24 percent a year ago. Mortgage lenders were included in the financial services category, which accounted for 13 percent of online ad revenue in the first half of 2008, compared with 15 percent a year ago.
David Silverman, a partner at PricewaterhouseCoopers LLP said the first half of the year showed "strong growth" in Internet ad revenue, despite an economic slowdown that has put "significant pressure on the advertising industry" in general. Silverman attributed the growth to the efficiency and effectiveness of targeted and measurable Internet ad campaigns.
That could be one reason search advertising campaigns, in which advertisers pay for keywords to generate Web site traffic, accounts for a growing share of Internet ad revenue. Search revenue accounted for 44 percent of second quarter revenue, compared to 40 percent during the same period a year ago. Search revenues were up 24 percent for the quarter compared to a year ago, to $2.5 billion.
Display ads of all types — banner ads, rich media, digital video and sponsorship — captured 33 percent of second quarter Internet ad revenue. Within the category, banner ads had the greatest market share (21 percent) followed by rich media (7 percent), digital video (3 percent) and sponsorship (2 percent). As a whole, second-quarter revenue for the display ad category was up 13 percent from a year ago, to $1.7 billion, although market share remained unchanged.
Online classifieds and lead generation both saw a decline in revenue and market share during the second quarter compared to a year ago.
At $804 million, online classified revenue for the second quarter was down 7 percent from a year ago. Although online classifieds accounted for 14 percent of Internet ad revenue in April, May and June, that’s down from the 17 percent market share those ads controlled a year ago.
Second-quarter revenue from lead generation was down 1 percent from a year ago, to $402 million. The 7 percent market share for the category was down from 8 percent a year ago.
PricewaterhouseCoopers could not provide more detailed information on Internet advertising by real estate companies and mortgage lenders, and the report did not attempt to forecast future ad spending.
Projections for real estate
But another company that tracks ad spending by real estate companies and mortgage lenders in detail, Borrell Associates, provided Inman News with its own projections through 2013.
Borrell estimates that spending on online advertising by real estate-related companies and mortgage lenders grew by nearly 20 percent in 2007, to $9.1 billion, and that it will continue to grow through the downturn — but at a much slower pace than during the height of the boom.
While online ad spending by real estate companies and mortgage lenders grew by 30.4 percent in 2006, to $7.6 billion, Borrell is forecasting that annual growth in real estate-related online advertising will slow to 11.3 percent in 2008 and 5.1 percent next year.
"We see a slowdown this half of the year and have adjusted our forecasts downward for 2008 and for 2009," said Peter Conti, senior vice president at Borrell Associates. "Interactive spending continues to show strength throughout this downturn. The major change to growth patterns previously forecast is acceleration. Events looked for in 2010 are now forecast for 2009."
Total real estate-related ad spending — including not only ads placed on the Web but in newspapers, television, radio and sent via direct mail — is projected to decline by 2.2 percent in 2008, to $31.6 billion. Borrell forecasts that growth in online spending will largely be offset by large declines for newspapers, directories and other print mediums, and direct mail.
That mirrors the trend in 2007, when Borrell estimates newspapers saw real estate-related ad revenue fall 16.9 percent, and directories lost 11.8 percent of the previous year’s business. Direct mail outfits also fared poorly, experiencing a 12.7 percent drop in revenue.
By 2013, Borrell expects the Internet will capture 33.1 percent of a projected $35.3 billion real estate-related ad spend, compared to a 19.6 percent share of the $29.9 billion expended in 2005. Internet-related advertising includes ads placed by real estate agents and brokers, rental property management firms, real estate developers, and mortgage originators.
From 2005-13, Borrell projects that newspapers could see their share of the real estate advertising pie slip from 25.8 percent to 19 percent. The company’s analysts thinks direct mail will only account for 6.3 percent of the real estate-related ad spend in 2013, compared to 14.3 percent in 2005.
Cable TV and cinema are expected to make modest gains in market share during that time period — broadcast and cable TV combined are expected to command 22.2 percent of real estate-related ad spending by 2013 — but the 13.6 market share point shift to online is nearly equal to the 14.8 points Borrell expects to be lost by both newspapers (6.8 points) and direct mail (8 points).
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