Is Internet Advertising Revenue Falling As Fast As Print? (NWS)(NYT)(YHOO)(MSFT)(GE)(MNI)(GCI)(MHP)(TWX)

According to MINOnline, advertising pages in major monthly magazines are down 20% for issues from the first two months of this year. One of the most popular weeklies, The Economist, suffered ad pages losses of almost 30% through the end of last week.

Newspaper advertising revenue at a number of the largest chains fell by 20% last year, and early evidence indicates that ad sales at dailies at companies such as Gannett (GCI) and McClatchy (MNI) continue to fall at a rate at least that sharp this year.

Now there is evidence that online display advertising at major websites is not doing much better. The theory has been that "new media" would outperform print because it is a more efficient and targeted way to reach selected audiences. When a recession is deep enough, that may not matter.

Several online media properties are saying that their advertising revenue is running down between 20% and 30% compared with  the first quarter of last year. An analysis of large internet websites shows that this is probably true.

Most internet advertising is sold in two segments. The first is called premium display. Advertisers pay CPMs of as much as $20 to reach the right audiences. Automotive marketers were among the most active companies in this high end of the industry. Now their presence is almost completely gone.

The second segment of online display is known as "remnant." It takes up the inventory not sold to premium advertisers. Remnant advertisers are not concerned with exact demographic targeting. Their goal is to reach as many people as possible. Often these advertisers are trying to get consumers to come to their websites with "free" offers or are marketing products with very broad appeal like voice over IP phone services. The CPMs for these ads is extremely low, often below $1.

Over the last several weeks the portion of remnant ads at major websites has moved up dramatically which is bringing down the overall CPM yield for many large internet properties.

One example of this is anti-obesity ads from Judysweightloss.com running at MSNBC, a joint venture between Microsoft (MSFT) and the GE (GE) division NBCU. The business section of The New York Times (NYT) has been carrying ads for Slimfast.com. Yahoo!’s (YHOO) homepage is running marketing messages for Creditreport.com. The front page of its finance section at the web portal is showing ads for Classmates.com.

Even high-end demographic online properties are suffering. WSJ.com, part of News Corp (NWS) is running advertising for sister website Barrons.com which it probably carries for free. Businessweek.com is running marketing messages offering four free copies of it print edition. Forbes.com is carrying direct response messages from online shopping service Brookstone.com. CNNMoney.com, part of Time Warner (TWX) is also running ads for Freescore.com.

The first quarter is going to be a disaster for internet advertising. As a matter of fact, it already is.

Douglas A. McIntyre