Yang Upbeat About Online Ad Industry Prospects

Delivering a keynote speech at the IAB U.K.’s annual Engage conference in London today, Yahoo CEO Jerry Yang was optimistic about the state of the online ad industry, describing the current economic downturn as “a great time for opportunity” for online businesses.

Addressing a theater packed with marketing executives, Yang said he expects the online advertising industry to emerge from the looming recession “stronger than it went in,” but outlined three trends that would characterize ad spending in the coming months.

First, he acknowledged that brand advertisers will inevitably have to reexamine and readjust their budgets. This is a reality already being felt by publishers and media owners, including Yahoo, as demand for display advertising declines.

Last month, Yahoo reported weaker performance in premium display advertising during the third quarter, noting guaranteed display ad volume and pricing was down in the U.S. as non-guaranteed ad volume and pricing rose. Overall, spending on Yahoo was slower for most ad verticals, although finance, travel, retail, and auto were the hardest hit in Q3.

Ad network display ad prices dropped over the last two quarters, according to PubMatic’s AdPrice index. The firm reported effective CPM prices from July through September dropped 21 percent sequentially since the previous quarter, and 27 percent compared with Q1 2008.

While display ad revenues fall, Yang predicted growth in performance-based mediums will continue, as advertisers invest more heavily in more measurable search and direct response advertising.

Finally, he suggested the current climate could delay the adoption of new platforms. “I’m optimistic about mobile advertising, and broadband video to a certain extent. In this environment it’s up to marketers whether or not they adopt.”

Finishing on an optimistic note, Yang said, “In many ways, the darkest days bore Yahoo and Google. Somewhere out there, there is a great company being built.”

Yang did not accept questions from the audience and left immediately following his presentation.