American banking giant JP Morgan has reduced its online advertising forecast for the second time in two months, estimating an annual growth rate of 25% in 2008 and 13% in 2009, down from 28% and 19%, respectively.
The firm said: “Since we reduced our estimates on September 4th, we have seen a further slowdown in the economy, particularly in the last two weeks of the third quarter.
“Weakness continued into October and spread from the US and UK throughout continental Europe and Asia. Additionally, dollar strength was greater than expected which will further depress growth rates.”
It also noted that display advertising’s deterioration is more pronounced than expected, adding that costs for premium online advertising inventory are “flat to slightly down.”
UK online ad display spend was down 5.28% for Q2 2008, according to recent figures from Nielsen (see Online Display Adspend Down 5.28% For Q2 2008).
However, figures IAB/PricewaterhouseCoopers found that total internet display advertising spend rose 16.3% year-on-year to £333.8 million for the first half of 2008 (see Internet Advertising Spend Up 21%).
“Looking forward, we think [cost-per-thousands] will remain depressed and sell-through rates will worsen,” said JPMorgan. “As a result, we are lowering our fiscal 2008 and fiscal 2009 domestic display estimates to $7.95 billion (11% growth) and $8.45 billion (6% growth) from $8.15 billion (14% growth) and $9.43 billion (16% growth).”
The firm said that the global display ad market should expand 14% in 2008 versus its prior projection of 16%.
“Search performance held up in the third quarter but we expect ad budget cuts to bleed through,” it continued. “We continue to see performance-based advertising holding up better than banner advertising.
“Long tail advertisers continue to allocate additional dollars to search. However, keyword price inflation is moderating. Additionally, we think marketing spend pullback in some segments including travel, telecom, autos, and retail is worsening.”
As a result, JP Morgan lowered its US search growth estimates to 23.4% in 2008 ad 17.3% in 2009 from prior projections of 27.4% and 25.5%, respectively. The global search ad market now is expected to expand 34% in 2008 versus. J.P.Morgan’s prior projection of 36%.
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