Worldwide Online Ad Spending

JULY 3, 2008

Reaching for a bigger slice of the total ad pie

Several recent worldwide online ad spending projections indicate that the medium still has a lot of room for growth.

Worldwide online ad spending will reach $65.2 billion in 2008, according to IDC's "Digital Marketplace Model and Forecast." The research company predicted 15% to 20% annual growth through 2011, when spending would hit $106.6 billion.

IDC said that online ads would account for nearly 10% of all ad spending across all media in 2008, rising to 13.6% by 2011. Nearly one-fifth of Western European ad spending will be online by that time.

"The long-term opportunity for Internet advertising can be seen in the disparity between per-capita spending," said John Gantz, chief research officer at IDC, in a statement. "Total advertising revenues equate to more than $105 per inhabitant of the planet, while Internet advertising revenues are less than $50 per active Internet user."

In May, Credit Suisse lowered its worldwide online ad spending estimates and forecast only modest growth in total ad spending for the next two years. The investment bank said the US and most other developed nations would actually drag growth down, thanks to phenomenal growth in developing nations.

Credit Suisse's estimates of online ad spending as a percentage of total ad spending were very close to IDC's: 10% last year and 12% this year.

Yet another estimate, this one produced in May by Bernstein Research put online ad spending at 9.4% of total ad spending for 2008, rising to 13.1% in 2012.

The climbing ratio of online ad spending to total ad spending will help drive up the dollar amount advertisers spend on the Web.

eMarketer senior analyst David Hallerman has noted a number of reasons to expect continued growth in online ad spending in the US, which also apply to the medium worldwide. Among them:

• Online ads are more measurable than other media, making them increasingly appealing to advertisers.
• The Internet audience is huge, so the simple process of advertising following eyeballs will lift spending.
• Internet ad prices are rising, thanks to targeting and other techniques, which can push up overall spending.

"US Internet ad spending is not impervious to the current economic weakness. However, those economic effects are more the case for display advertising than for paid search advertising," said Mr. Hallerman. "Even so, the trend toward display ads, including video and rich media, continues to attract brand marketers as they shift spending from traditional media to the Internet."