Display Ad Spend Lost Momentum in Q1

Spending on display ads appears to have faltered during Q1, growing only 8.5 percent, according to a new TNS Media Intelligence report.

That’s only about half the growth rate of the year-ago period, when TNS reported display ad spending grew by 15.9 percent.

Jon Swallen, SVP of research at TNS Media Intelligence, said certain verticals notably curtailed their display ad spending. Telecom advertising, usually a heavy user of Internet display ads, was “very weak” in first quarter, he said. So was retail, particularly local advertisers that divide their online budgets between display and search.

“The difficulties the retail market is going through, with all the cutbacks in consumer spending and all the uncertainty about the general economy resulted in cutting back in many sectors,” said Swallen.

The report provides some of the first evidence online advertising has been negatively affected by the staggering U.S. economy. Of course the pain is more pronounced for overall ad expenditures, which according to TNS increased by only 0.6 percent in the first quarter. Of the seven sectors measured (TV, magazine, newspaper, Internet, radio, outdoor and newspaper inserts) only newspaper insert spending, which grew 8.8 percent compared to Q1 2007, outpaced Internet display ads.

Meanwhile, spending on newspaper advertising declined 5.2 percent quarter-to-quarter and radio advertising dove 4.5 percent, according to TNS. Television saw meager growth of 1.7 percent. Outdoor advertising fared a little better, at 2.5 percent, but magazine advertising — coming in with 0.8 percent growth compared to Q1 of last year — was virtually stagnant.

While notably weak in Q1, online ad growth has been slowing for some time. Beginning last year, reports from Nielsen, the Interactive Advertising Bureau and TNS all suggested growth in digital advertising, while still healthy by most measures, has settled down to a more gradual pace.

Swallen said the Internet’s stamina at remaining an attractive place to advertise “reflects the ongoing shift of ad money from traditional analog media to a variety of digital media, of which Internet display is one form but not the only one.”

One of the vanguards of online advertising is the financial services industry, said Swallen. Given the sub-prime mortgage crisis, the financial services industry is enduring some tough times and its overall ad spend was flat for the period, according to TNS. However, Swallen noted the category’s expenditure on Internet ads grew 14 percent compared to Q1 of 2007. “That industry allocates a larger share of its budget to the Internet than any other category,” he added.