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October 20, 2008 12:57 PM

Blodget forecasts 10 percent online ad decline, decimated startups, etc.

Analyst turned Web pundit Henry Blodget is predicting sharp declines in online advertising will lead to big pain in startup world. Not too surprising, but he quantifies the declines with some trend analysis.

Blodget also speaks with some authority here, as he's in the business himself. He didn't say how the fall will affect his growing network of ad-supported business news sites, but I wonder if he's thinking about paid subscriptions.

A few excerpts from his gloomy report:

"It's time we woke up and faced reality. Online display-ad spending will fall in 2009, probably sharply. It will probably fall again in 2010. Hundreds of startups counting on advertising as a business model will be flattened. Yahoo, CNET, AOL, and other big display-ad properties will get hammered. Legions of me-too video sites will croak. Ad networks, the 'hey, let's just start an Internet company!' flavor of this second dotcom boom, will get decimated."

So at least the outlook's good for auction houses and people shopping for used office furniture.

Blodget continued:

"How bad will the online display ad market fare over the next couple of years? At this point, we would estimate at least a 10% drop next year and probably more. (20% is not inconceivable). Again, the overall market fell 25% from 2000-2002. There are many reasons why this falloff should not be be so extreme -- namely, that half of online ad customers won't go bankrupt this time. On the other hand, there are many reasons why this falloff could be worse: The general economy is going to get clobbered in this recession -- something that didn't happen last time."

Perhaps the comparisons to print advertising won't be so harsh anymore ...

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