The Online Ad Recession Continues. Is This What A Reset Looks Like?
The recession in online advertising, which began in the first quarter of 2009, continued into the second. Every quarter we keep track of the combined advertising revenues of the four largest Web advertising companies …
Context & Ripple Effects
This tracker has been building since the fall of 2008, when Silicon Alley Insider argued that online display ads would fall sharply in 2009 — a call TechCrunch's quarterly tally of the four largest web ad companies is now testing against actuals. The Q1 2009 drop confirmed the downturn had arrived; the Q2 numbers reported here show it was not a one-quarter dip.
The interesting wrinkle is what else ran that same month: a MediaPost analysis finding that [[a:1185455|online ad spending was still rising at double-digit rates and gaining share versus every other medium]]. Both can be true if the pain is unevenly distributed — overall digital budgets grow while the biggest players' combined revenue shrinks, implying share is churning rather than the market collapsing. That framing matters for the Web 2.0 survival question raised in December 2008, when content sites were already bracing for a 50% revenue slowdown.
First-order effects
- The four largest web advertising companies post a second consecutive quarter of combined revenue decline, turning the Q1 2009 downturn into a trend their own guidance and cost structures now have to absorb.
- Content publishers that budgeted for the worst-case scenario flagged in late 2008 — cuts approaching half of expected revenue — get confirmation the slowdown is persisting rather than rebounding.
Second-order effects
- With total online spend growing per the MediaPost data while the top four's combined revenue falls, advertisers are visibly rotating toward lower-cost performance formats and smaller networks, pressuring display CPMs across the board.
- Rivals below the top tier gain a window to win displaced brand budgets on price, but only if they hold margins through the same downturn — forcing consolidation conversations among mid-size ad networks and exchanges.
Third-order effects
- If the pattern holds — aggregate digital share gains coexisting with shrinking big-four revenue — the industry's center of gravity shifts from selling impressions at premium prices to whoever owns the cheapest measurable conversion, a structural reset rather than a cyclical trough.
- Ad-dependent startups facing the funding squeeze discussed since the WSJ's December 2008 'Will the Recession Kill Web 2.0?' piece are pushed toward non-advertising revenue models or acquisition, thinning the independent publisher layer.
The trend: Online advertising is bifurcating during the recession: digital's share of all media budgets keeps climbing even as the largest web ad companies' combined revenues contract, redistributing value faster than the downturn destroys it.