By Dave Porter

(AXcess News) Reno - If you're looking for signs of a recession you won't find it online if you take into consideration the latest forecast for online ad spending for 2008.

According to PricewaterhouseCoopers (PwC) David Silverman, "Despite the current state of economic uncertainty, 2007 was another record year."

Silverman's comments were based on the "2007 Internet Advertising Revenue Report", which is prepared in cooperation with the Internet Advertising Bureau (IAB).

The IAB and PwC said that Q4 2007 Internet advertising revenues reached $5.9 billion, the highest ever for a single quarter and 24% higher than the same period in 2006.  But as I've ranted about in the past, one has to take into consideration that those results are based on the top fifty 'paying members' of IAB and do not take into consideration the long-tail of the Internet properties and especially, local - which Borrell & Associates tracks.  Adding Borrells' local figures to the 'big picture' usually adds a couple billion more to the equation.

The IAB and PwC said that search, display, classifieds and lead generation all continued growing. As in prior years, consumer advertisers were the largest category of Internet advertising spending, at 55% of 2007 full-year revenues, up from 52% from the full year 2006.

To consider search a growth arena is fine, but this is like looking at a Boy Scout summer camp and saying no one else is enjoying the lake - and according to Gordon Borrell, founder of Borrell & Associates, the future of online advertising is not in search.  In fact, Borrell boldly predicts a shrinkage in that sector by 2012.

eMarketer predicts that despite continued strength relative to most other media, Internet ad spending growth will drop to about 16% in 2009. This slowdown reflects a combination of the maturing online ad market and overall economic weakness.

There will be a bounce back in 2010 due to a recovering economy and a much larger influx of branding-oriented ad dollars flowing online, eMarketer notes. One major source of those escalating spends will be video ads, which are relatively expensive and greatly desired.  Borrell also holds promise in the growth of online video advertising in the coming years, though neither Borrell or eMarketer take into consider pending legislation (net neutrality) once again on lawmakers' lips that could raise the cost of bandwidth and with it, a reluctance to display videos.  Or at the very least, a surge in charges for advertising that uses bandwidth up more readily.  So cost factors in the future are apt to affect the landscape of popularism when it comes to newer forms of online media - this includes flash and other image-based ads.

"By 2012, the anticipated boom in online video advertising combined with continued strength in more established Internet ad categories, such as paid search and classifieds, will mean spending growth greater than 20% for the first time since 2008," said David Hallerman, senior analyst at eMarketer.

While Hallerman and Silverman talk about forward prediction of the 'macro' state in online ad spending in the coming years, 2008 leaves me wondering where these ad dollars are going to come from.  With a slowdown in U.S. consumer spending clearly underway and higher gasoline prices (gasoline hit $4.00 a gallon in Reno this morning), a Goldman Sachs analyst said last week that the investment banking firm was becoming more bullish on Amazon.com (Nasdaq: AMZN) online revenue growth, raising their rating to 'buy'.  The analyst was quoted in a research note as saying that high prices at the pump would reflect in higher online purchasing and to a degree that may be true.  But lets face it, if your wallet is growing thin it doesn't matter - you just can't afford to shop - online or in stores.  So to some degree, there will be more online shopping going on, but whether or not money is thrown towards the web by ad agencies is another matter when in rough economic times the advertising budget is usually one of the first things cut no matter what media is used - print, radio, tv - or the web.

The future is in local and savvy methods of using targeting tied to search components that will put advertising online in front of the right audience.  Borrell & Associates predicted in a report just weeks ago that local forms of advertising will enjoin with an almost renaissance approach through market-oriented public relations firms in the form of videos and other branding techniques to draw more ad dollars.  The IAB/PwC take, alongside eMarketer's, looks more at the 'big picture'.

I hereby coin the term 'Ad 2.0'!   Web 2.0 is described as using technologies such as RSS to expand site reach and Ad 2.0 is similar, only it uses more intelligence-oriented marketing to display advertising to online traffic that looks at content related to the ad topic and could include newer formats such as overlays in combination with contextual rollover displays.  Basically, Ad 2.0 takes advantage of what people look up online and goes deeper in compiling information on where you go online (privacy concerns should be inserted here) - your habits. Some boutique online ad agencies like Chitika.com are exploring Ad 2.0 formats and are experiencing some degree of success with its deployment.

Chitka began using a behavioral targeting technology in May that boost results so well that the agency has begun to deploy it across all of its ads, including its popular eMiniMalls.  In a blog post on May 16, Chitika wrote: "Recently, we have been testing our new behavioral targeting technology and the results have been fantastic - an excellent boost in CTR and eCPM. Because this is working so well, Chitika is now implementing behavioral targeting for all Chitika ads, including eMiniMalls, MPU, RPU, etc."

While I'm citing the boutique east coast online ad agency, AXcess News' network of sites currently doesn't display Chitika ads - but I'm told, we're exploring it further.  I thought it only fair to point this out to our readers.

Ad 2.0 goes well beyond behavioral targeting and encompasses programs that may include partnerships with local content providers.  A move Seattle-based Marchex, Inc. (Nasdaq: MCHX) has ventured into recently in partnering with Yelp and Awo, which was announced in late April.  Mobil advertising is also coming onto the ad scene at Marchex and a partnership was announced with AdMob on April 30th.  I should point out that Marchex's rating was downgraded by Susquehanna Financial on May 15 to 'Neutral' from 'Positive'.   Apparently, Susquehanna hasn't heard of Ad 2.0!