One would expect that after a record-setting spree in 2010, that online advertising revenue would grow more modestly in 2011. Not so…here’s why.
2010 U.S. online ad spending increased a robust 15 percent to a total of $26 billion. First quarter 2011 advertising spending data reveals that digital ad spending increased by 23 percent from the same period in 2010. Total online ad revenue for the quarter was $7.3 billion.
This continuing surge of advertising dollars to digital advertising has resulted in eMarketer nearly doubling its growth projection for online advertising revenue in 2011. The new forecast from eMarketer is that the U.S. online advertising spending will grow 20.3 percent to 31.3 billion in 2011.
Advertisers continue to shift more of their advertising budget to the Internet. eMarketer is now predicting that digital advertising dollars will make up approximately 20 percent of the advertising dollars spent in the U.S. in 2011, up from a 17 percent share in 2010. The portion of major media advertising dollars devoted to online advertising is expected to reach 28 percent by 2015.
While search advertising is still the leading form of online advertising, display advertising is currently growing faster than search. For this year, eMarketer estimates that search advertising revenue will reach $14.38 billion, a growth of 19.8 percent. At the same time U.S. advertisers will spend $12.33 billion for online display ads.
If eMarketer is right, online display ads will surpass search advertising in advertising expenditures by 2015.
Other reporting agencies validate these trends although the specific numbers may differ somewhat because of the differences in databases among the reporting organizations. What is surprising to many who monitor advertising trends and expenditures is the growth of online display ads. It wasn’t that long ago that many in the field were predicting that online display ads had peaked as a percentage of online advertising and would lose market share to other forms of online advertising.
The rapid growth of Internet advertising is the result of a number of factors. The major factors driving this growth are the following:
- Following the Eyeballs of Their Customers
- More Choices for Online Ad Dollars
- Shift of Local Advertising Online
- Branding Ads Moving to Internet
Following the Eyeballs of Their Customers: Potential customers are spending more time online. Comescore reports that the average U.S. Internet user spent 32 hours per month online during 2010. Users between the ages of 45 and 54 spent more than 39 hours online each month. Internet users spend one of every six minutes online on social networking sites. The average time web users spend on Facebook has increased from an average of 4.6 hours to 6.3 hours per month in the U.S. over the past year. LinkedIn, Twitter and Tumbir have also grown at impressive rates.
More Choices for Online Ad Dollars: The choices for online advertising are growing with both more formats for online ads and more channels where they can be placed. Ad formats have grown. In addition to online video, banner ads, rich media and sponsorships, online ads are becoming more social. For example, Facebook, Twitter, YouTube, etc offer their own customized advertising options.
Video advertising is growing faster than other online ad formats. eMarketer expects U.S. online advertising expenditures will grow 51.2 percent to $2.16 billion. That’s after an approximately 40 percent growth in 2010. Within the next few years online video advertising will rank only behind search and banner ads in terms of overall online ad spending.
Social Media and mobile are the driving force in the increase in the number of channels for online advertising. Facebook is experiencing a tremendous growth in online advertising. Facebook along with Google, Yahoo, Microsoft and AOL will capture 68 percent of overall online ad budgets in 2011. ComScore estimates that Facebook captured 31.2 percent of all display ad impressions in the first quarter of 2011!
The increasing number of channels and formats has resulted in high inventory and lower pricing for Internet banner and video ads is also contributing to attracting more advertising dollars.
Shift of Local Advertising Online: More and more advertising dollars are being redirected to online from the print medium. Newspapers and Yellow Page publishers are seeing a dramatic decline of local advertising dollars as local businesses shift their advertising dollars to the online arena.
Branding Ads Moving to Internet: While direct response marketing continues to be the main driving force in online advertising, brand advertising is increasingly becoming a part of the online advertising world. Better pricing, channels and formats are attracting brand marketers. Brand managers see online video advertising with its targeting and analytic capabilities as a particularly engaging medium to get their branding message out. eMarketer is currently projecting that close to 40 percent of online ad spending will be allocated to branding in 2011.
This train has left the station. It’s apparent that television and online advertising are the darlings of advertisers these days. The remainder of advertising mediums are losing advertising budget share as the online advertising train continues to roll in the coming years.
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