US Internet ad revenue down 5% on last year – expect a shorter downturn than post dot-com

The US Interactive Advertising Bureau has just released 2009 Q1 figures, showing US$5.5 billion for a 5% fall from first quarter of last year.

This has to be put in the context of overall advertising revenue. The Newspaper Association of America recently announced that first quarter newspaper ad revenues were down over 28% over last year, while Barclays Capital early estimated that total US advertising revenues would fall 13% this year.

It is also important to note that on a seasonally adjusted basis this still is an effective rate of US$24 billion annually, which represents a very large industry, and around five times annual internet advertising revenue at the time of the peak of the dot-com boom.

You can see in the chart that it took around three years for internet advertising revenue to recover to their peak level in late 2000. Clearly people are concerned that the current downturn might last that long.

I expect that online advertising will recover by next year. It will not resume the same pace of growth that it experienced in 2006 and 2007, but will be absolutely be in positive territory. One of the many differences with the last major downturn is that the decline of the most prominent advertising channels – read newspapers, television, and magazines – is now prompting active reallocation of ad spend to digital channels by even the slowest-moving marketing directors.

As a reference point, it is interesting to note the variation in advertising revenue per capita across countries – where is ad revenue above or below where its current intrinsic value relative to other channels?

Some other thoughts on the figures (mainly focused on the next quarter) from MediaMemo, Techcrunch, GigaOM, and LA Times.