A new report from Sanford C. Bernstein Research claims to provide more evidence of online advertising’s resilience in the face of an economic downturn, which the investment bank considers increasingly likely. Though Bernstein’s analysis, titled Advertising in a Time of Economic Downturn, (no link yet) doesn’t foresee any major fall-out akin to what occurred when the dot.com bubble burst after 2000, Yahoo (NSDQ: YHOO) and AOL (NYSE: TWX) are viewed as particularly vulnerable. Overall, the relative weakness that could afflict Yahoo and AOL are part of what Bernstein sees as a competitive pattern emerging among the major online players that will only become more pronounced if a full-blown recession comes to pass:
– Emerging pattern: The differences found in Q3 online ad revenue growth among the big names will be repeated and amplified in the event of a downturn. Specifically, the year-over-year growth figures cited by Bernstein that form the pattern includes Google’s (NSDQ: GOOG) gain of 62 percent, Yahoo’s 16 percent, MySpace’s 135 percent, Facebook’s 200 percent; meanwhile Yahoo was up only 16 percent and AOL’s ad revenues grew 10 percent (however, Bernstein excluded revenues from Advertising.com). Still, putting things into perspective, the industry ad growth average in the U.S. was 25 percent.
– Paid search continues to dominate display: Bernstein estimates paid search in the U.S. saw average growth of 31 percent, while display was up 19 percent. Strong performance in display from AOL’s Advertising.com and Yahoo’s Right Media Exchange, in particular, helped prevent an even wider disparity.
– AOL and Yahoo’s display weakness: Both companies’ premium display businesses have been hit hard by pricing declines due to added competition from other online ad networks and exchanges. The impact on AOL is particularly severe because it is also experiencing falling pageviews. The report suggests that AOL’s wounds were self-inflected; essentially, by reorganizing many of its advertising verticals and by canceling the interactive game show Gold Rush.This combination reduced AOL’s display performance by an estimated 6 percentage points ($12 million) in Q3. Not counting those items, AOL’s display ad growth would have been 12 percent instead of 6 percent, which is more in-line with Yahoo’s Q3 growth of about 15 percent.
– Worst-case scenario – still rosy for online: Because of marketers’ steady shift from traditional media ad spending to online, Bernstein expects the latter to maintain a healthy growth rate of 11 percent.
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