Friday, November 09, 2007

Online Ad Spending Expected to Double by 2011

U.S. companies will continue to increase Internet ad spending, though the disruptive effect of the credit squeeze has caused analysts to back off slightly from earlier projections, according to a new study.

The report, issued by analyst firm eMarketer, projects online ad spending to reach $42 billion by 2011, more than doubling from the estimated $21.4 billion this year. Those numbers are slightly down from eMarketer's previous estimates of $21.7 billion in spending for 2007 and $44 billion for 2011.

Under the revised projections, online ad spending for 2007 is expected to increase 26.7 percent from the $16.9 billion spent last year. By contrast, advertising spending on all media is only expected to increase 2.1 percent.

"Don't expect any large growth in total media," eMarketer's David Hallerman said. "The shift away from traditional media is accelerating."

The study, which was conducted in partnership with with market researcher TNS Media Intelligence and Advertising Age, defines traditional media as TV, radio, newspapers and magazines.

Internet ad spending remains poised for substantial growth. The top 100 U.S. advertisers as calculated by Ad Age are still allocating less than 4 percent of their total advertising budget to digital media, Hallerman said.

The shift of ad spending from traditional media to the Internet among major advertisers was one of the key trends the study identified.

Hallerman cautions that percentage growth changes can be deceptive, as they are bound to taper off as an industry builds mass. While "Internet's total growth is going to be decelerating," he said, the digital share of the advertising pie will continue to grow for the foreseeable future. Hallerman offered no predictions on how large that share will become down the road.

The study found that search advertising will remain the strongest of digital ad spending through 2011, holding steady around 40 percent. Spending on display ads also is projected to remain at around 20 percent, followed by online classified spending at about 17 percent.

The biggest proportional gainer will be rich media, driven by video ads, which is expected to jump from 8 percent this year to 13 percent in 2011.

Hallerman admitted that eMarketer's estimates may be conservative in areas where businesses models are still developing, and said he expects to revise his projections in rapidly developing sectors like video.

"I think we're going to see some of the largest growth in video ads on televisions stations' Web sites," he said.

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