Financial crisis impacts online expansion

The Global Financial Crisis is having an impact on all areas of the economy, especially those in early stages of development like the social media sector. Pownce, I Want Sandy and Stikkit have all announced their demise today, and other businesses are sure to follow.

The Stubborn Mule has summed up the situation well:

The rate of innovation online of late has been extraordinary, but the result is a proliferation of services that is not sustainable. With the Global Financial Crisis progressing outside the financial sector to the broader economy, venture capitalists will be tightening their purse-strings and this will inevitably lead to a period of consolidation in the online landscape.

Read The Mule’s full post here.

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Can online advertising survive the GFC?

Two major reports have come out recently delivering positive feedback for the online advertising market.

The Internet Advertising Bureau (IAB) and Frost & Sullivan have forecast that the online advertising industry will see revenues continue to increase as advertisers turn to cost effective strategies as marketing budgets tighten and a media buyers place a rigorous focus on ROI.

Figures from the IAB’s latest Online Advertising Expenditure Report by Pricewaterhouseshow that online advertising had experienced 30% growth, year-on-year, with a total spend of $450 million in the third quarter of this year. Of course, this growth is expected to soften during the fourth quarter as the full impact of the global economic meltdown comes into play.

Of the online advertising categories, Search and Directories advertising experienced the largest growth from the prior quarter, growing at $25.0m or 13.4%. General Display advertising also performed well, growing $11m or 9.6% from the previous quarter. Online Classifieds, however, experienced minimal growth, with an increase of $2.75m or 2.5% from the previous quarter. This must be shaking a few business who are seeing the Classified advertisement that existed online transform into various forms of Search advertising.

Australia’s total online advertising market revenues have been forecasted to increase by 24 per cent year-on-year in 2008, growing from $387 million to $481.4 million, by Frost & Sullivan.

Darryl Nelson, Frost & Sullivan Senior Research Manager, Digital Media, Asia Pacific, said:

The online general advertising market continues to enjoy solid growth and is not only well-placed to weather the current slowdown in overall media budgets but is set to benefit from its increasing cost-effectiveness in tight economic conditions.

Advertisers continue to see the increased lead generation and sales coming from the online channel, but are also now looking online to get more bang for their brand marketing buck. The current tightening of marketing budgets overall strengthens their commitment to their digital strategies.

Download IAB PWC September 08 Online Advertising Report

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