Wall Street crisis crimps display ad spending

Financial service firms pull back, driving overall display spending down 6%

Yesterday, we postulated how the crisis in the financial services industry might affect Internet companies.

Today came a direct answer.

A huge drop in advertising by financial service companies caused overall display ad spending to drop 6% in the first half of 2008 compared to the same period in 2007.

Financial spending dropped 27% to $1.1 billion from $1.5 billion, according to Nielsen Online. Financial companies were by far the biggest spenders on advertising both this year and last.

The good news: consumers will be seeing a lot less of those annoying, jerky ads for mortgage products on the Web. The bad news? Those ads were paying a lot of the bills at Internet companies.

If the bursting of past bubbles provides any roadmap, this trend still has a ways to go. The government takeovers of the mortgage giants Fannie Mae and Freddie Mac, and the fire sale liquidations of investment banks Lehman Brothers and Merrill Lynch have only just occurred.

As the new owners mark down their real estate-related assets to the new market reality, more pain is ahead for any company with exposure to the mortgage market. Ad spending by those companies is sure to drop further. 

The Neilsen numbers also showed a continued shift away from static display ads toward text-based search ads and rich-media ads, including video advertising.

The Nielsen report estimated that the growth in search and video advertising helped push overall online ad spending up 11% for the first half.

That's good for Google, which keeps adding to its leading search market share and is starting to find some ways to monetize YouTube (albeit on a small scale).

The biggest loser is Yahoo, which still gets a large chunk of its revenue from display ads.

Table 1: Top 10 Industries Ranked by Online Image-Based Advertising Estimated Spending for January - June 2008 (U.S.)

Source: Nielsen Online, AdRelevance