Research firm IDC is looking ahead to rapid growth in online advertising spending in the next three years, projecting that the global market will reach $106.6 billion by 2011.
While they see impressive annual percentage increases, the researchers note that online ad spending is still a relatively minor part of advertisers’ media buys.
“Compared to more mature types of advertising, Internet advertising is growing at a phenomenal rate,” wrote IDC Chief Research Officer John Gantz. “But Internet advertising is still relatively new and growing from a much smaller base.”
The report comes at a time of considerable macroeconomic uncertainty, as economists debate whether the U.S. economy is officially in a recession, or just a severe slowdown — as politicians prefer to call it.
Whatever the name, online ad companies and Web publishers are wondering just how hard it’s going to hit them.
The IDC researchers found that the U.S. will continue to lead the world in online ad spending, with revenues reaching $45 billion in 2001. That would more than double last year’s mark of $21.2 billion that PricewaterhouseCoopers and the Interactive Advertising Bureau reported in their annual market audit.
IDC analysts have previously argued that an economic turndown could in fact help the online advertising industry, as companies reallocate marketing dollars to lower-cost digital buys.
The new research continues that line of thinking. The analysts estimate that online advertising will account for 10 percent of global media spending this year. By 2011, it will inch up to 13.6 percent.
But that would still leave the Internet as a distant fourth behind TV, print and direct mail.
Industry analysts note that the portion of marketing dollars spent on the Internet has not kept up with how much time people spend online.
Online metrics firm comScore (NASDAQ: SCOR) recently estimated domestic online ad spending at 7 percent, while reporting that the Web accounts for 17 percent of the time that Americans spend engaged with all forms of media.
Analysts cite a variety of reasons for advertisers’ slowness to warm up to the Web, including the ongoing development of good tools to measure a campaign’s effectiveness. Another favorite explanation is that advertisers historically have been skeptical about new media and tend to spend conservatively until they are convinced the emerging format is a viable way to reach their audience. It happened with broadcast television in the ’50s; it happened with cable television in the ’80s; it’s happening today with the Internet.
IDC does look for a proportional increase in U.S. online ad spending, pegging the Internet at 14.6 percent of the media mix in 2011. The study does not offer a companion projection for how much time people will spend online compared with other media, but taking comScore’s estimate of 17 percent, it appears that marketers will still be playing catchup for some years to come.
By category, IDC said that keyword ads will remain the dominant format, accounting for more than one-third of overall online spending. The second-largest category will be display ads, followed by online classifieds.
