Display market in January freefall

By Paul McIntyre | 1 February 2011
 

EXCLUSIVE: The big online portals have been hit by a sudden collapse in the display advertising market which some are calling a “train wreck”.

Blame is being slated by some observers back to the gathering momentum of TV multichannels, which are offering airtime at unprecedented low prices, although other key industry players say they are unsure why demand has “fallen off a cliff”.

“January is a disaster,” said one online media executive who did not want to be named. “February is worse and no-one can explain why but everyone is worried.”

After strong growth for calendar 2010, online media companies and buyers say demand in January has plummeted and concerns are mounting for the March quarter.

No-one canvassed by AdNews expected the sudden collapse in market sentiment for the opening months of 2011. According to SMI figures - which tracks media agency spending - the online display market was up 32% to $546 million for 2010.

December last year was up 15% to $48.2 million but many online operators in January are now seeing volume declines and significant erosion in margins.

Amnesia Razorfish managing director Michael Buckley said the online portals were at “rock bottom” but could not explain the sudden fall in demand. “They’re all very much struggling and we don’t know why but we’re taking advantage of it,” he said.

Buckley said the make-up of Amnesia’s client base – skewing heavily to travel - meant his group was not seeing a fall-off but the broader market weakness meant “we’ve never been able to negotiate lower.”

Fairfax Digital, ninemsn and Sensis are understood to be scrambling, with Sensis understood to be off by upwards of 30% in January over the same time last year.

News Digital Media claimed it was in high single digit growth for January but the market was “much tougher” than expected. “We can’t say definitively but the multichannels appear to be a plausible reason for the downturn,” said an NDM spokesman.

There were also suggestions newspaper groups were facing a similar and sudden fall off in print advertising demand for January and February.

News Ltd’s sales director Tony Kendall said the opening weeks were a struggle but were now picking up. “January, I agree, was a bit of a train wreck but February for us [in print] looks pretty strong. Multichannels are absolutely taking money off radio and we had a sense they were taking money off magazines. There might be a bit happening in online now as well.”

There were exceptions, however. Yahoo!7 chief executive Rohan Lund said he was not seeing any downturn in demand. “Year-on-year we’re up quite a bit – double digits,” he said. “We’re fairly bullish about this year and it’s started on track.”

Smaller online ad sellers like pay TV group MCN are also reporting growth of 15-20% for January and through the March quarter. MCN will write an estimated $12-$15 million in revenues this year for the online versions of its pay TV channels.

“We’re up 15%-plus for January", said MCN chief executive Anthony Fitzgerald. “The reason our online performance is strong is because it is linked completely to our TV business. The vast majority of our online revenues are generated through multiplatform, multichannel integrated campaigns. When online is integrated with TV is when it works best in my view. Multichannels are having an impact. TV has completely reversed the downturn of 2008. The doomsayers saying there was a structural shift underway were wrong.”

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