Web to Pass Papers As Key Ad Segment

AUGUST 9, 2007

US online ad spending is still growing.

US Internet advertising spending will reach $61.98 billion in 2011, according to Veronis Suhler Stevenson's "VSS Forecast" report published in August 2007.

The media investment bank estimated that alternative advertising spending, including Internet, mobile, video game and digital out-of-home ads, grew 36.6%, to $26.53 billion, in 2006.

Alternative media spending is expected to rise at a compound annual growth rate (CAGR) of 17.4% through 2011, to $197.11 billion. Traditional advertising and marketing will see an aggregate CAGR of 3.2%, to $438.99 billion in 2011.

"Leading national advertisers have accelerated their diversion of dollars from traditional print and broadcast media to alternative digital platforms to combat media and audience fragmentation, increased consumer control and multitasking, and the growing impact of advanced technology on conventional media models," James Rutherford, executive vice president and managing director at VSS, said in a statement.

Spending on alternative marketing, including branded entertainment, interactive marketing and e-custom publishing, increased 17.3%, to $61.67 billion, in 2006.

By contrast, 2006 spending on traditional marketing such as direct mail and promotions grew a mere 5%, to $192.34 billion, albeit on a much larger base.

VSS's projections are more aggressive than those made by eMarketer in June 2007. The firm's $62 billion estimate for 2011 online ad spending also includes RSS, blogs and podcasts, which likely accounts for some of the difference.

"For Internet ad spending to surpass newspapers is a sign as big as any," David Hallerman, eMarketer Senior Analyst, said. "The shift in ad budgets has not yet caught up to the shift in media usage, but as the VSS data indicate, it will, at least eventually."