Online Classifieds are Down -- Sign of Bigger Drops?

With the number for online advertising in for the first half of 2008 in, there’s every reason for interactive agencies to breathe a sigh of relief. Both Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers show double-digit growth for year over year in online advertising. Overall online advertising was up by 15.2 percent — nearly double what the TNS Media Intelligence report showed just a few weeks ago.

Of course, this comes at the same time advertising growth rates as a whole are slumping, and it may be that even online may not be escaping that downward trajectory. As an eMarketer report from today points out, one of the soft spots in online are classified ads, which may act as a canary in the coal mine for the whole industry. From the eMarketer report:

“The negative growth for classifieds closely reflects economic weakness,” said David Hallerman, senior analyst at eMarketer. “Whether used on eBay to sell products, on job sites by employers, or for real-estate sales, classified ad buys tend to be short-term purchases with short-term objectives.

“In contrast, most display-related ads, such as banners or video, are contracted for ahead of time. For that reason, they are less of a mirror of the current state of online advertising than classifieds,” Mr. Hallerman continued.

This comes at the same time that eBay itself was forced to layoff a tenth of its workforce. And even while growth rates may be up for online, these growth rates are unarguably slowing from what they once were. Beyond the obvious problem all advertisers are facing — an economy tightening quicker than a tourniquet — online publishers and the ad networks that represent them will be looking at different problem. While for years the demand for online advertising has outstripped the number of publishers providing it, that equation is reversed. Again, from the eMarketer report:

Jack Myers also noted that the ad industry was undergoing a major transformation even before the crisis hit.

“The danger of ascribing downward spiraling economics of ad spending to the economy alone is that it camouflages several more endemic causes for ad spending declines,” Mr. Meyers wrote yesterday. “The media marketplace is transitioning from one in which demand has exceeded supply (even as supply has grown exponentially)…to a marketplace in which the availability of supply is outpacing demand.”