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Holy Crap, Search Advertising Actually Shrank In Q4 (GOOG)

freefalling.jpgWatch out below!

U.S. search advertising spending fell an unprecedented 8% year-over-year in Q4, search marketing firm Efficient Frontier reports. It was the first time search advertising spending declined in a quarter year-over-year since Efficient Frontier began keeping track.

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If true, it's particularly bad news for search advertising leader Google (GOOG), which EF said maintained its 76% market share. But it's not a happy day for followers Yahoo (YHOO), which saw market share slip to 20%, or Microsoft (MSFT) -- its share down 4.2% -- either.

Google execs always said that the company would weather a recession better than most advertising-exposed companies because search advertising return on investment (ROI) is so easily measured. And while it's true that retail marketers actually increased their spending 9% during Q4, hits to finance (down 20% vs. Q4'07) and automotive (down 23% vs Q4'07) more than made up for that gain.

ElmoFalling.jpgAnother theory gone bust is that the continued shift of money from offline to online will keep online advertising growing even as it implodes offline.

Here's what's actually terrifying about all this: what we heard all quarter from agencies and publishers was that yes, ad spending may be down some, but mostly marketers were just moving their spending into products with more discernible ROI -- you know, like search.

There's not much that offers more concrete ROI than search. So if it was down 8% year-over-year in Q4, how badly was display advertising damaged?

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Now you know why publishing execs are saying we'll be "lucky" if display spending is down just 10% in 2009.

Caveats? We got 'em. If you'd like to feel better about these numbers, you can remember that they are from one source only, they measure U.S. spending only, and that they come from an undefined sample size.

Still, we bet its numbers like these that got Yahoo chairman Roy Bostock, Microsoft CEO Steve Ballmer and Time Warner CEO Jeff Bewkes in a room together. As spending growth -- and even, perhaps, spending -- shrinks, we're sure to see industry consolidation. Also: like with saw with Google's first layoffs ever last week, expect more shrinking within the companies themselves.

See Also:
How Microsoft Blew Search (MSFT)

Carol Bartz's "Gut" Tells Her Not To Do Microsoft Search Deal (YHOO)

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Photo: ReyGuy, LaertesCTB

On February 28, Axel Springer, Business Insider's parent company, joined 31 other media groups and filed a $2.3 billion suit against Google in Dutch court, alleging losses suffered due to the company's advertising practices.

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