Search Advertising Dropped 8% in 2008: Why Users Should Care

by on January 19, 2009 · 12 comments

The WSJ reports that a study will be released tomorrow noting an 8% drop in total “paid search” revenues in 2008.  Google’s Fourth Quarter results will be released Thursday.  While this is clearly bad news for Google, Yahoo!, Microsoft and other companies that sell ads next to the results of their search engines, it’s also terrible news for the Internet users who have come to take for granted not just these free search engines, but the other free services and content cross-subsidized by search ad revenue.  A quick look at the offerings pages of Google,  Yahoo! and Microsoft (downloads and some services) should remind you of a few of these ad-supported offerings.

What’s even worse for users is that search ad spending may be the “canary in the coalmine” for online advertising overall:  A drop in search ad spending may suggest that display ad revenue for 2008 may have fared even worse.  While search ad revenue funds offerings from search engine providers, display ad revenue is the bread & butter of millions of websites, from the “short head” (big websites like ESPN.com) to through the “long tail” (small websites).   As advertisers cut back on buying web ads, there will be less funding available for “Free!” culture—and we’ll all suffer from the resulting decline in creativity and innovation.  

Let’s hope 2009 is a better year for advertising—both search and display—than 2008.

  • dimitris

    If ad services have in fact consumed far more than their optimal “allocation” of capital, then a sustained drop in online advertising revenue should result in some beneficial reallocation of that capital to more worthy ends.

    I mean we do believe in the invisible hand, don't we?

  • MikeRT

    Another possibility is that we will end up with more tolerance for paid web services. That wouldn't be a bad thing either for innovation.

  • http://enigmafoundry.wordpress.com eee_eff

    Berin:

    Advertising is probably down across all media. (Yes this really is the Great Depression 2.0)

    So, I expect that newspaper revenue was down more than online, and that TV and radio spending will also see near double digit drops, although radio will (probably) bounce back next year.

  • Jim Harper

    Of course, advertising isn't the only source of money, and money isn't the only incentive behind creativity and innovation. For example, here's a Web site that produces a tremendous amount of interesting content though it generates almost no money from its meager advertising program.

  • Jim Harper

    Of course, advertising isn't the only source of money, and money isn't the only incentive behind creativity and innovation. For example, here's a Web site that produces a tremendous amount of interesting content though it generates almost no money from its meager advertising program.

  • Jim Harper

    Of course, advertising isn't the only source of money, and money isn't the only incentive behind creativity and innovation. For example, here's a Web site that produces a tremendous amount of interesting content though it generates almost no money from its meager advertising program.

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