For newspapers, more bad news: Online ad revenue is plummeting

For years, even after the economy began to buckle under the weight of a recession, online advertising revenue remained relatively strong. But a new study, released on Friday, shows that fiscal malaise has finally – and fully – struck the digital sphere.

According to the Interactive Advertising Bureau and PricewaterhouseCoopers, online ad revenue in the US market sank to $5.5 billion in the first quarter of 2009, down 10 percent from $6.1 billion in the fourth quarter of last year – and down 5 percent from the first quarter of 2008. It is the first major slump of its kind since the burst of the dot-com bubble in 2002. (Revenue levels dipped – although not this drastically – in 2008.)

The news could be especially troubling for magazines and newspapers, which have increasingly turned to the web to make up for the loss of print ad dollars. Over the past few months, many outlets have shuttered or cut back on their print operations. In February, The Rocky Mountain News, the oldest newspaper in Colorado, ceased printing, and in March, the Seattle Post-Intelligencer shut its presses.

Remaining papers, such as the Boston Globe, have struggled to deal with declining print ad revenue – much of it lost to Craigslist, and other classified sites – while shifting to a web-centric marketing strategy. (In April, the Christian Science Monitor began publishing its daily edition online only.)

An uptick on the horizon?

Despite the gloomy numbers, Randall Rothenberg, IAB's CEO, said there was some cause for hope. "We're confident that growth will resume as the U.S. economic climate improves," Rothenberg said. "Interactive advertising is the most accountable way to reach consumers – and in this economy, digital media will be a core component of any successful marketing campaign."

David Silverman, a partner at PricewaterhouseCoopers, concurred. "Current economic conditions are clearly challenging," he told the BBC today. "Nonetheless, interactive media continues to consume a larger piece of the overall advertising pie."

[Editor's note: The original version of the article misstated that advertising was down 5 percent from Q4 2008. The statistic should have said 10 percent.]