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Online advertising in decline?
A surprise profit’s warning from ValueClick, an online advertising network, and troubles at Ebay are the latest harbingers of difficult times ahead for the online advertising market.
According to the Financial Times, ValueClick saw its share price fall 20% when it announced it was reducing its financial forecasts for the full year on the back of softness in the display advertising market.
The news follows reports from eBay that consumers were spending less money on cars and other expensive products on the Internet auction.
Pundits had long predicted that the structural shift of advertising dollars towards online and away from traditional media, particularly newspapers, would insulate the sector from an advertising slump. This is proving to be partially true. Transaction-based PPC (pay per click) advertising, the model that underpins Google’s Adwords/Adsense business, is still strong.
The difficulty for ad-funded entertainment businesses is that PPC deals focus on transactions – booking a holiday, buying life insurance – that are difficult to fit around a video game or music download. The slowdown in display advertising will put further pressure on those games businesses reliant on display advertising.