Down-turn Reality Bites Internet as 1Q Ad Sales Fall 5 Pct

Internet advertising in the United States dropped 5 percent in the first quarter, marking the marketing medium's first downturn since 2002 when the Web was still recovering from the dot-com bust.

The data released Friday by the Interactive Advertising Bureau and
PricewaterhouseCoopers LLP provided another reminder of the widespread pain wrought by the longest U.S. recession since World War II.

But the Internet's financial backbone isn't sagging as badly as that of more established media like newspapers and broadcasters, where far more severe advertising losses have triggered massive layoffs, bankruptcy filings and doubts about whether their businesses will ever be the same again.

Advertising revenue has been drying up as more companies clamp down on their marketing budgets to save money during tough times. Traditionally big spenders like banks, automobile makers and dealers, department stores and real estate developers have been grappling with major crises that have forced some of them to merge with rivals or simply close their doors.

Even before the Internet recorded the first-quarter decline in ad revenue, sales have been slowing down after years of rapid growth.

U.S. advertisers spent $5.48 billion on search, display, video and other Internet ads during the first three months of the year, a decline from $5.77 billion during the same quarter last year.