The smart debate in the comment section about whether yesterday’s Yahoo news reflected a Yahoo issue or a market issue, as well as whether a general slowdown in online ad spending would affect Google. My take is that it is almost certainly a market issue and that, eventually, it would/will almost certainly affect Google.
As several readers noted, the slowdown was attributed to two sectors, automotive and financial services. Given what’s happening to Ford, GM, and Chrysler, the first isn’t a surprise. Given what’s happening to the housing market, the second isn’t a surprise either, especially if “financial services” is really a synonym for “mortgage brokers.”
A Bloomberg story today reports data from Nielsen that confirms some of the above, but also suggests the problem is worse at Yahoo than elsewhere:
Advertisers reduced the amount they spent on graphical image
ads in the U.S. by 6.3 percent to $163.6 million in the week
ending Sept. 10 after a 2.7 percent drop the previous week,
according to Nielsen//NetRatings…
Demand for banner ads on Yahoo by financial services
companies fell 4.2 percent to $16.9 million in the week ending
Sept. 10 and 16 percent in the previous week, Nielsen said.
Outlays across the Web rose 2.2 percent for the week ending Sept.
10, after falling 10 percent a week earlier.
The story also notes that, at Yahoo, financial services accounts for an extraordinary amount of revenue.
Financial services accounted for 33 percent of U.S. display
ad spending on Yahoo at the end of August, the highest of any
category, while automotive took 2.6 percent, according to
The Bloomberg story focuses primarily on display advertising, and it is possible that, for now, search has been spared. If the problem is the economy rather than Yahoo, however, as consumer demand falls off, search spending should drop, too. Less consumer demand will likely translate into fewer clicks (less revenue) or a reduced conversion rate, which will put pressure on advertisers’ ROIs (reducing the amount they can profitably pay for clicks). It is also worth noting that, thanks to their high-ticket sales, both automotive and financial services have extremely high keyword prices, so any fall-off in advertiser spending or end-user demand in these categories will have a far greater impact on revenue than on overall clicks.
Bottom line, I have never seen a general industry revenue slowdown that did not eventually affect the biggest player. If that’s what this is, therefore, the safe bet is to assume that Google will eventually be affected, possibly severely.