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Internet Ad Future Is A Load Of Bull

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Expect a bull market for Internet advertising in 2007. Expect that bull to keep charging for the foreseeable future. In fact, says Susquehanna Financial Group (SFG), 2007 will mark a crucial turning point in the industry. Think Google. Think targeting, video, social networks, and online gaming. And don’t stop thinking about them. But forget about the page view altogether.

“Our analysis is very positive for Internet advertising in 2007 and beyond,” says SFG Internet analyist Marianne Wolk. “We find digital content is on the verge of a major growth cycle that should fuel greater participation online.

“We also see trends supporting significant growth in targeted advertising, which should be a boon for ad networks like Google monetizing the long tail.”

By 2011, online advertising is expected to reach $82 billion, growing at an annual rate of at least 21 percent. Over half of that will be spent in the United States, where American Internet users are expected to pull in $43 billion.

Much of that increase in online ad spending will be due to the current imbalance in media spending. In 2006, US advertisers spent $286.4 billion, or about $957 per person across all media. Though the Internet accounted for an amazing 25 percent of total media consumption, the Web only pulled in six percent of the total spend.

Susquehanna projects the total spend for online advertising to increase to 12 percent in the US by 2011. The same sectors that caught everyone’s attention in 2006 will be the ones driving that growth in the years to come.

Where To Find Growth:

Behaviorally targeted advertising: This includes geotargeted, personalized, user-history based search results. According to SFG’s report, “behavioral advertising should set a new benchmark in monetization.” With a forecasted 32 percent growth rate over the next five years, behavioral targeting spend is expected to increase from $1.2 billion to over $5 billion.

Social network advertising: SFG projects advertising in social networks will increase from $280 million in July 2006 (64% pocketed by MySpace) to $2.3 billion by 2010.

Video advertising: Videos are expected to bring in major green for those that sell video inventory, once advertisers get comfortable with the likelihood, or find a way to prevent, being skipped altogether. In 2006, video ads represented just 2.5 percent of the total US market. By 2010, that should increase to $2.9 billion, or 8 percent of total spending.

Video game advertising: Get ready for an explosion. Though online in-game advertising only brought in $56 million in 2005, SFG’s Consumer Software analysts, Jason Kraft and Chris Kwak, expect that market to grow 70 percent annually, reaching almost $1 billion by 2010.

What’s Driving Growth

Toolbars: SFG says search toolbars embedded into web browsers have become a significant factor in users’ online behavior. Queries via toolbar have risen sharply year over year by 70 percent, now generating 16 percent of all US queries.

Local search: Thirty-five percent of all searches are local in nature, and 45 percent of these searchers have commercial buying intent. But you better grab them quick. Most users abandon a search or rephrase a query if results aren’t found with in 1.6-2.0 pages.

Advances in image and video search: As Google and other major engines perfect their image recognition and speech recognition technologies, and as video becomes more in demand, targeted advertising becomes more likely and more desirable.

Social networking: About three-quarters of Internet users visited a community site last November. And if one were skeptical about the staying power of the MySpaces of the world due to a perceive youthful fickleness, comScore recently reported that over half of MySpace visitors are over 35.

Further, 51 percent of auto and travel buyers in the past six months consulted consumer-generated content. A quarter of them consumer-review sites influenced their purchase decision. Over two-thirds of those people went on to evangelize to their friends and family.

More to come. . .

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Internet Ad Future Is A Load Of Bull
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  • jonny shi

    Dear Jason, what the difference between “Internet and Web”? Because you’re writing: Though the Internet accounted for an amazing 25 percent of total media consumption, the Web only pulled in six percent of the total spend. thanks.

    • Jason Lee Miller

      Johnny,

      Often, we interchange the two words, when we shouldn’t. Technically, they are different, though most people don’t differentiate. The Internet is technical archictecture that’s been around for quite some time. Vinton Cerf, who works for Google now, helped develop it. The World Wide Web has only been around since 1993, since Tim Berners Lee sent out the first HTML page into cyberspace. In a nutshell.