“The consistent growth of online advertising is a clear indication that marketers continue to embrace the true power of interactive advertising,” said Sheryl Draizen, SVP, General Manager, IAB. “Marketers are experiencing how this medium enhances their ability to target and engage the audience that matters to their brand and then measure its effectiveness in ways no other medium provides.”

“Interactive advertising, with its eighth consecutive quarter of growth and the largest single quarter ever, is on pace for its biggest year. This growth follows the trend of where consumers are spending their media time and the unique ability of Interactive advertising to effectively target and monitor ad campaigns,” said David Silverman, Partner, Assurance, PricewaterhouseCoopers.

Quarterly Internet Ad Revenues Surpass $4 Billion

Conducted by the New Media Group of PricewaterhouseCoopers, the “Advertising Revenue Report” was started by the IAB in 1996, and represents data from all companies that report meaningful online advertising revenues. The results are considered the most accurate measurement of Interactive advertising revenues because the data is compiled directly from information supplied by companies selling advertising on the Internet. The survey includes data concerning online advertising revenues from Web sites, commercial online services, free e-mail providers, and all other companies selling online advertising. First and third quarter revenue reports are estimates, with the actual figures being released along with second and fourth quarter data, respectively. PwC does not audit the information and provides no opinion or other form of assurance with respect to the information.

The IAB sponsors the Internet Advertising Revenue Report, which is conducted independently by the New Media Group of PricewaterhouseCoopers. The full report is issued twice yearly for full and half-year data, and top-line quarterly estimates are issued for the first and third quarters.

Source: IAB/PWC Survey (November,2006)

The internet’s share of total ad spend will increase from 5.8% in 2006 to 8.6% in 2009 and is headed for well over 10%

The internet will overtake outdoor this year and radio in 2009

Zenith Optimedia predicts that internet ad spends will grow 28.2% in 2007, while the rest of the market grows 3.9%. The rise of the internet has been dramatic. It has taken only eleven years to overtake two long-established media: cinema (which it overtook in 1997) and outdoor (which it overtook this year), and by 2009 it will be larger than radio.

There is still plenty of potential for growth in internet ad spends. Internet penetration is peaking at about 70% in the most mature markets, but is only 17% worldwide. Even in the developed markets, the internet receives a much lower share of ad budgets than the amount of time consumers devote to it would suggest it warrants. In 2005 consumers in the USA, Japan and the UK (the top three ad markets) spent 21.9% of their media time using the internet, yet advertisers in these three markets spent only 6.8% of their budgets online – a consumption-to-spending ratio of more than 3:1.

Zenith Optimedia expects the internet to take nearly 9% of global ad spend by 2009, but experience from the most developed markets suggests it is heading for well over 10%. The internet already attracts more than 10% of ad spend in three markets (Norway, Sweden and the UK), and by 2009 Zenith Optimedia expects it to do so in ten markets (Australia, Canada, Japan, Norway, South Korea, Sweden, Taiwan, the UK and USA). The internet has its highest share in the UK, where it will attract 13.5% of ad spend this year and 21.5% in 2009.

The Middle East is driving the rapid growth of the ‘Africa/Middle East/Rest of World’ category, thanks to oil dollars and the proliferation of Middle Eastern media. This year’s spike in oil prices has caused a corresponding peak in ad market growth, but even after the recent moderation in
prices Zenith Optimedia expects 11%-12% annual growth.

The USA, however, will still add far more ad dollar than any other market (30% of the global total), despite its more modest growth in percentage terms.

Source: Zenith Optimedia (December, 2006)

Zenith predicts that global internet advertising spend will increase 30 per cent to $24.1bn this year and by 84 per cent to 2008. Growth is being driven by smaller advertisers, with companies in the 10 biggest categories spending a lower share of their budgets online than the industry average between 2001 and 2005.

Marketing on web search engines such as Google and Yahoo is popular with small traders who lack funds to buy exposure in the mass television or press and often want to target niche audiences.

As search advertisers typically pay when customers click on ads, the practice is praised as being more efficient at reaching buyers than traditional marketing, though critics say search is still vulnerable to fraud and inaccuracy.

But in the UK, where the internet’s share of national advertising is highest at a forecast 12.9 per cent this year, search marketing is believed to account for more than half of all internet advertising spend.

Jonathan Barnard, head of publications at Zenith, said search and other web formats were bringing “new money” into marketing rather than merely encouraging advertisers to move budgets from traditional to new media.

The issue of how much new money the internet generates is a strategic one for established media owners, faced with the challenge of building new media businesses without cannibalising existing units.

Mr Barnard said: “Internet advertisers are often people who wouldn’t have been able to spend on television or press anyway, so we think the internet is creating some new demand.”

However, he said there was evidence that the rise of the web as a low-cost alternative was also encouraging large brands to drive better bargains when buying television or press advertising, holding down growth rates in non-web media.

Zenith predicts global ad spend will slow from 6 per cent this year to 5.4 per cent in 2007 before a modest pick-up to 5.9 per cent in 2008 – all measured at average 2005 currency rates.

Source: Financial Times LTD (October, 2006)

According to a new report by Jupiter Research, “US Online Advertising Forecast, 2005 to 2011,” paid search is the primary driver of growth in the online advertising market. Search advertising overtook display advertising in 2005 and will continue to be the largest online advertising component over the next five years.

“The large increase in search advertising is due to new clients experimenting with search and advertisers competing for keyword placement, which drives up prices,” said Emily Riley, Jupiter Research Analyst and lead author of the report. “Additionally, as search advertisers mature, they start using longer lists of keywords, increasing their overall budget.”

Current online advertising spending is outperforming previous expectations, jumping 40 percent in 2005 and projected to grow 21 percent in 2006. In addition to paid search, large spending increases for online classifieds and rich media are fueling the market, which will continue to grow at a brisk pace over the next five years.

“While online display advertising spending will not be as large as search spending, several subsections of display advertising, such as rich media and video, will grow rapidly,” said David Schatsky, President of Jupiter Kagan. “However, high growth for these forms of new online advertising will begin to cannibalize static display advertising.”

Source: Jupiter Research (July, 2006)