It is a bit early to reach this conclusion, but Yahoo! issued a profits warning yesterday blaming a slowdown in online advertising. Their shares lost 11% and Google and Ebay also suffered. Details here.
This sends out a warning signal to me.
A lot of what I read about these days and have posted about on this blog is the huge amount of traffic to web2.0 sites that is yet to be monetised. Like any other, advertising is a two sided industry – you have the supply of inventory (or traffic) and the demand from advertisers to fill it. I hope we are not witnessing a contraction in demand just as supply is increasing.
That said, the long term trends are undoubtedly excellent, and I continue to look for investments in the sector. Media consumption is moving online, mostly at the expense of television and the advertising dollars will follow. Moreover there is a lag which means that even if online stopped growing there would be several years of good growth in this market. These figures are six months or so out of date and come from when we invested in affiliate network Buy.At but c30% of media consumption is online and so far only c5% of advertising spend has followed it. Online advertising is also more effective than TV because you can measure it properly. The old truism “half my advertising is good, I just don’t know which half” simply doesn’t apply. I could wax lyrical on this subject for hours :).
So I don’t think this is the beginning of the end of the good times in this sector, but we may be in for a short term blip.