Online Advertising on a Rocket Ride

NOVEMBER 7, 2007

The numbers are soaring.

Choose an adjective: Epochal. Momentous. Historic. Whatever the label, US online advertising spending is entering a new era.

eMarketer projects that US online advertising will more than double as a percentage of total media, rising from only a 6% share of total media in 2006, to slightly more than a 12% share in 2010.

In roughly the same period, online spending will nearly triple, rising from $16.9 billion in 2006 to $42 billion in 2011.

According to David Hallerman, eMarketer Senior Analyst and author of the new report US Advertising Spending, these four milestones mark the change:

“First, US Internet ad spending surpassed $5 billion in Q2 2007, the largest sum recorded in any quarter according to research from the Interactive Advertising Bureau and PricewaterhouseCoopers.”

eMarketer projections suggest that, in Q4 this year, spending will leap past the $6 billion mark.

“Second, while 69 of the 100 largest US advertisers put smaller budget shares into four traditional media—television, radio, newspapers and magazines—in 2006 than the previous year, 70 of the same group put larger shares into Internet advertising.”

Furthermore, 58 did both—decreased their traditional spending share and increased the Internet share.

“Third, even as the credit crunch pulls ad money off the total media table, the Internet looks to be more resistant to economic turmoil,” says Mr. Hallerman. “To put the obvious into figures, online advertising contributes more and more to the total ad spending universe every year.”

That share will be 7.4% this year, approach one in ten dollars next year, and will likely reach at least 13% by the end of 2011.

Finally, Mr. Hallerman notes, “Data from both eMarketer and TNS Media Intelligence indicate that 2007 Internet ad spending will be higher than for radio, as reported in August. That is the first time online ad spending will be greater than for any of the four traditional measured media.”

The average ad spend per Internet user is also growing. In fact, 2007 marks the first year that marketers will spend more than $100 to reach each person online. And, by 2011, advertisers will be spending nearly $200 per user.