Online Advertising: Global

Exec Report: Global
The downturn in the global economy has had an enormous impact already on the media industry and forecasts
for the next couple of years are depressing reading. However, online is expected to weather the storm quite
well. With pressure on advertising budgets, online is thought to be in a better position than traditional media
due to greater levels of measurability, accountability and innovation in ad formats.
ZenithOptimedia expects the internet to be the
only medium to actually attract higher advertising
expenditure in 2009, with growth of 8.6% expected,
down from 20.9% in 2008.
Much of the growth is forecast to come from search
advertising, due to predictions that consumers will
be using search more during these tight financial
times to seek out the very best deals.
Market share for the medium is expected to
continue growing over the next two years, from
12.1% in 2009, rising to 14.6% in 2011; see Figure
1 and Table 1.
ZenithOptimedia believes that once confidence
returns to the market, internet advertising is
expected to return to double-digit growth: 11.3% in
2010 and 15.3% in 2011.
It has noticed however that the number of sites on
the web have increased at about twice the speed
of internet advertising expenditure, most of which
goes to a handful of big players. It predicts that
a number of internet companies with business
models based on advertising may find that their
model is unsustainable during these difficult times.
Even in social media’s high growth market, figures
are lower than previous estimates. However,
eMarketer senior analyst and report author Debra
Aho Williamson said that the social media sector
is likely to see significant growth in a number of
markets, saying: “In markets such as China, Japan,
South Korea and Russia, some social networks
have built growing revenue streams from selling
virtual items to members.”
eMarketer predicts growth of 17.3% for global spending on social media advertising in 2009. Marketers are
forecast to invest $2.35 billion (£1.64 billion) on ads on social networking sites by the end of 2009, with this
figure rising to $3.49 billion over the next four years.
Online Advertising Revenue & Forecasts
US
According to the Interactive Advertising Bureau (lAB) and PricewaterhouseCoopers (PwC), US internet
advertising revenue for 2008 was $23.4 billion, an increase of 10.6% over 2007.
The IAB and PwC Internet Advertising Revenue Report demonstrated that search revenues totaled over
$10.5 billion in 2008, up 20% from the $8.8 billion reported in 2007.
Display-related advertising totaled $7.6 billion,
compared to $7.1 billion reported in 2007, showing
an 8% increase. Display-related advertising includes
display banner ads, rich media, digital video, and
sponsorship, and equates to a third of all online
spend; see Table 2 and Figure 2.
Randall Rothenberg, president and CEO of the IAB,
said: “We are seeing an ongoing secular shift from
traditional to online media as marketers recognise
that ad dollars invested in interactive media are
effective at influencing consumers and delivering
measurable results.
“In this uncertain economy, where marketers
know they need to do more with less, interactive
advertising provides the tools for them to build
deep, engaging relationships with consumers – the
experience marketers gain from this will deliver
dividends especially after the economy turns
around.”
Screen Digest has taken the findings from the IAB’s
full year 2008 report as the foundations for its latest
online advertising forecast. Q4 2008 growth figures
were much lower at 2.6% than the previous three
quarters which all demonstrated growth of around
15%. As such, it forecasts that online advertising
revenues will fall by 4.8% in 2009 and only stabilise
in 2010.
Banner advertising (-8.8%) will not be fully
compensated by the double-digit growth of online
video, so that the display category will be down
3.6%, it said.
Search is predicted to shrink by 2% and non-display
categories such as classifieds will experience
double-digit falls.
Vincent Letang, senior analyst at Screen Digest,
said: “Looking at the US results from the fourth
quarter last year, it’s very clear that online display
will fall this year despite the growth of video.
‘’Search was still growing in Q4 but the growth rate has slowed down so much that we now believe the next
quarter will be in the red too – and online Classifieds will continue to fall. Our full year forecast for total internet
advertising is thus down around 5%.
“‘Display and search, being huge and mature media, cannot be immune from the ongoing ad slump even
though they will continue to outperform most other media during the period. We indeed anticipate the total US
ad market to go down two digits in 2009 while some media (press, local TV) could be down by up to 20%.”
By comparison, eMarketer’s latest forecasts are relatively upbeat, although they did come out before the
IAB’s latest report. It forecasts that in 2010, online ad spending growth will return into the double digits at
10.9%, with 13.5% predicted for 2013.
Its share of total advertising revenues is forecast to
increase from 9.9% in 2009 to 15.2% in 2013; see
Figure 3.
eMarketer also forecasts that search marketing
will see spending grow by 14.9% to $12.3 billion
in 2009.
It claims that two basic assumptions support this
forecast. The first is that the measurability of
search will help retain many budgets and increase
some others, while the second is that consumers
who monetise search ads by deciding whether or
not to click will be both taking money off the table
(by shopping less) and putting money back on the
table (by searching for deals).
Commenting on the figures, David Hallerman,
senior analyst at eMarketer, said: “Especially in
economic turmoil, search is more trackable than
any other ad format. At this stage, it is a tried-andtrue
format that is supporting online growth.”
eMarketer predicts that the internet will be a buyers’ market in 2009 as US marketers will continue to stretch
their budgets by making use of cost-efficient online ad placements. Besides the internet’s accountability and
targeting, which permit more focused media buys, lower prices for most display ads and less competition for
many search keywords will create this buyers’ market.
eMarketer’s analysis agrees with Screen Digest’s prediction that online video will buck the downward trend. It
states that video ad spending will rise by 45% in 2009 to reach $850 million, due to the increase of professional
video content and the increasing willingness of advertisers to use video to reach online audiences’ “hearts
and minds”.
According to eMarketer’s US Ad Spending report, the internet’s share of US media ad expenditure is rising
by at least one percentage point every year as marketers are spending more on internet ads and less on ads
in traditional media. These media spending shifts predate the recession, but the current economy reinforces
the new advertising models and makes them more permanent.
ZenithOptimedia forecasts search advertising to grow 9.0% in 2009, while classified grows just 1.8% and
traditional display shrinks 1.8%. New online formats are enjoying greater growth, such as 29.8% from internet
video and rich media, 29.7% from internet radio and 11.9% from podcasts. However these represent only
12% of US internet expenditure between them.
Europe
According to the European Interactive Advertising Association (EIAA) the internet is continuing to prove the
medium of choice for advertisers as they seek to maximise ad spend budgets.
The research found that 81% of advertisers claim that their allocated online ad spend has grown in 2008 and
predict that it will continue to do so over the next couple of years (+16% in 2009 and +17% in 2010).
82% of advertisers who have seen an increase in their online spend admitted it is coming directly from the
likes of print media (40%), TV (39%) and increasingly direct marketing (32%) budgets.
This is backed by the fact that three quarters state that they are increasing their use of online as an advertising
medium whilst 31% of advertisers claim their use of TV is decreasing and 40% cite a decrease in the use of
newspapers.
The survey revealed that online is playing an increasingly important role in overall advertising strategies, with
38% of advertisers now regarding online as essential in comparison to 17% in 2006.