Online ad trend get worse for Yahoo!, newpapers

New evidence shows that online advertisers are building their search engine marketing and moving away from big display ad investments. According to The Wall Street Journal, "Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ads that appear on search-result pages."

To state the obvious, the news seems to be bad for Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT), and AOL. These portals rely heavily on display ads for their revenue and have modest search income.

The data is much, much worse for newspapers. Companies like The New York Times (NYSE: NYT) are counting on online advertising to take the place of falling print revenue. A great deal of the advertising that runs at newspaper sites is retail and national display. Total ad revenue at The New York Times dropped more than 16% in July. Internet advertising was up less than 1%. Clearly, at that rate, online ads can do little to help that nation's big dailies.

The portals will struggle to keep their display growth intact. They have the lion's share of the market, so scale is on their side. They will almost certainly have the best chance of picking up the marketing dollars from the largest online advertisers. Even if the market keep slowing, their sales should be steady to modestly up.

Newspapers will not be so lucky.

Douglas A. McIntyre is an editor at 247wallst.com.