Internet Advertising: After First Quarter Disaster, Industry May Throw In The Towel On Q2

Internet display advertising had what may have been the worst quarter in its history. In the first 90 days of this year, by most measures, the cost-per-thousand that large websites charged advertisers dropped at least 25% . Any site that did not have significant traffic growth lost a quarter of its sales compared to the same quarter last year.

For companies such as Yahoo! (YHOO), TheStreet.com (TSCM), and IACI (IACI) the trend will be devastating to earnings. And, the worst may not be over.

Ads for which marketers pay very little, known in the industry as remnants, are still all over the top sites on the web. A recent ad at Yahoo! Finance markets a way to meet Russian women. Yahoo! Sports is running cheap ads for the “IQ Challenge.”  High-end political website Politico.com runs ads for Barron’s on its home page. The revenue from these is based on the number of Barron’s subscriptions sold, which can be very low.

The second quarter is going to be a tough one for the big online publishers.

Douglas A. McIntyre