How Much Ads Cost

APRIL 23, 2009

Online ads “all over the place” says one executive.

Data from Jefferies and Company puts a hard number on the cost of traditional ads in 2008.

The firm estimates that broadcast TV had the highest cost-per-thousand (CPM) rate of $10.25, with syndicated TV at $8.77. Magazines, cable TV, newspapers, radio and outdoor advertising round out the space.

As for spending in the online sector... it’s a little more complicated.

“It is all over the place,” said Rino Scanzoni of GroupM in a MediaPost article.

“It is very hard to say this is what the average is. The average is made up of some big, big swings, depending on what you are buying.”

A few companies have tried to measure those swings.

For display advertising, Credit Suisse estimated that in 2009 the average CPM will be $2.39, down from $2.46 in 2008.

Pricing for video ads also varied depending on where they were located on-screen. Online video consultancy LiveRail estimated that overlay ads ran CPMs of $7.40 and in-stream ads were priced at $16.40 in Q4 2008. AccuStream iMedia Research put the average 2008 figure as high as $35 for premium preroll online video ads.

As for paid search, JPMorgan projected that for every 1,000 searches, $75.33 would be generated from ads in 2009.

Getting a complete picture of CPMs for the online advertising space is difficult—especially when published rate card prices don’t always reflect reality. But averages and estimates reveal important trends and tendencies.

Dire Predictions: Global Ad Spending to Plummet

APRIL 20, 2009

Down, down, down...

Who cares if global ad spending is down?

Almost everyone should, because ad spending is a barometer of economic confidence. And while many political leaders in the US and worldwide point to “signs of recovery,” three major buyers of advertising around the world are giving the situation thumbs down.

Last month, GroupM, a division of WPP, predicted a 4.4% decline in global ad spending for 2009.

That forecast was topped (or bottomed, if you will) by one from Carat Insight, owned by Aegis, which put the worldwide ad spending decline for 2009 at 5.8%.

Now ZenithOptimedia, the media-buying unit of Publicis, the world’s fourth-largest advertising group, has weighed in with the heaviest hit yet.

Last December, ZenithOptimedia had expected merely a 0.2% decline for 2009, but the firm’s revisited figures now predict nearly a 7% decline in worldwide ad spending this year.

In fact, ZenithOptimedia now sees ad spending dropping 11% for magazines, 10% for radio, 5.5% for television, and on and on through the worldwide media spectrum.

“A lot of markets we were expecting to show at least modest growth this year are clearly going to be down substantially,” Jonathan Barnard of ZenithOptimedia told the Financial Times.

Amid the nearly unrelenting gloom, however, one figure shines out.

Internet advertising around the world continues to grow, projected to be up 8.6% this year—to reach 12.1% of overall global ad spending.

At least there is a little light at the end of the tunnel.

eMarketer’s Online Ad Spending Forecast

APRIL 1, 2009

Recession-proof no more.

On Monday the Interactive Advertising Bureau (IAB) released its online advertising spending numbers for 2008.

For an advertising channel that many pundits had claimed—unlike its traditional counterparts, such as newspapers, magazines and television—was immune to the effects of the economic slowdown, the figures were not good news.

After years of soaring growth, online advertisers have started pumping the brakes.

The IAB report, based on a study conducted by PricewaterhouseCoopers (PwC), showed that online advertising growth was cut in half last year. US online advertising revenues grew only 11% in 2008 to $23.4 billion—the slowest rate of growth since 2002.

Moreover, the road ahead will be even slower.

According to eMarketer’s revised projections, released today, the rate of US online ad spending growth will halve again in 2009, falling to 4.5%.

As a result, eMarketer projects that in 2009 online ad spending will reach only $24.5 billion.

Previously, eMarketer had predicted an increase of 8.9% for 2009, with online ad spending reaching $25.7 billion.

David Hallerman, eMarketer senior analyst, does not look at the figures and see a glass half empty, however.

“Particularly in this economy, it has to be considered good times when US online ad spending reaches record highs,” says Mr. Hallerman, “as it did in Q4 2008 at $6.1 billion and as it will in 2009, at $24.5 billion.”

“Now that we've entered into the depths of the current recession, the Internet is emerging as one of the only bright spots in an otherwise decimated media landscape,” adds Geoff Ramsey, eMarketer CEO.

“It is true that the growth rate for interactive has slowed over the past 12 months, but marketers are continuing to migrate a greater percentage of their precious ad dollars toward the digital channel.”

eMarketer Revises E-Commerce Forecast

MARCH 5, 2009


Jeffrey Grau, Senior Analyst

Online retail e-commerce will sink before it soars again.

eMarketer is now forecasting that US retail e-commerce sales (excluding travel) will contract by 0.4% in 2009, falling to $133 billion.

But—and here is the good news—as the economy improves, online sales will return to the double-digit growth rates seen prior to 2008.

Growth will come from online buyers who shift a greater share of their discretionary spending from stores to the Web. Pent-up consumer demand, especially among affluent online shoppers, will provide an additional sales boost.

By 2012, e-commerce sales growth will begin to decline—resuming another trend seen prior to 2008. This will be due to the inevitable maturation of the e-commerce sales channel, as growth in new online buyers approaches saturation.

All told, from 2008 to 2013 retail e-commerce sales will increase at a 9% compound annual growth rate (CAGR).

eMarketer benchmarks against the US Department of Commerce (DOC) when forecasting e-commerce sales. The DOC estimated online sales rose 4.6% in 2008, reaching $133.6 billion.

But most of this increase came in the first half of the year. After year-over-year growth rates of 13.3% in Q1 and 8.7% in Q2, sales grew only 4.6% in Q3 before plummeting nearly 5% in the important Q4 holiday season.

Schmidt: Economy 'Pretty Dire', Google 'Not Immune' (GOOG)

Google (GOOG) CEO Eric Schmidt's gloomy comments on the economy aren't helping Google stock, which is down 3.2% after-hours. During a fireside chat with Mary Meeker at Morgan Stanley's tech conference, Schmidt said:

• The ecomomic situation is "pretty dire."
• Combination of everything "does not appear to have a current bottom."
• "Obviously will affect online advertising market."
• "Will eventually be reflected in CPCs and CPMs."
• "We are not immune."
• Google "better positioned," but ultimately, "the sort of real pain that is being felt by corporations worldwide will translate to our world."

Is this particularly surprising? No. But it's a sign that the worst is perhaps still to come, especially for Google.

Schmidt also said some interesting things about Twitter, calling it a "poor man's email system." And Google's "inactive" M&A game. And a few other topics, like display ads, which we'll break out into a separate post.

Live notes:

4:05 Music winding down.

4:06 Psych! More music. This might be one of those lunch presentations that starts a little later than its scheduled time. Will keep updating every few minutes until it starts.

4:07 Just heard a voice through the music. Perhaps starting soon?

4:09 At any rate, Google engineering VP Vic Gundotra was just on a panel about the mobile Internet. Pretty standard non-news type of panel, but lots of praise for Webkit. My live notes are here.

4:09 Starting! Going through standard disclaimer stuff.

4:10 Moved the schedule back 10 minutes. Eric has been in the building for 15!

4:11 Meeker: A lot of chatter that the search market has settled and done. What's your view? Obviously a lot of innovation ahead of us. Bug where we put a malware statement out for users, and in that time, Yahoo searches gained very quickly. Looks like people will move from one search engine to another for variety of reasons. Of course Microsoft is working hard to build a competitive search engine, and has recently leaked some details. Some new entrants trying to mix search with other things.

4:12 People said that about search 10 years ago, with a different company.

4:12 You worked with Sun w/ networked computer. Netbooks? This is all part of cloud computing. Whatever term you want to use. Let's use cloud computing. One of those changes that's going to happen whether people in ecosystem allow it or not. Rather than buying a piece of software for a client, javascript and ajax code comes to your browser. But it's a fact that we live on very high performance wireless broadband networks. To me, the more interesting question is: What can you do that you couldn't do before with cloud computing? IT systems are so slow at the rate at which they evolve. So stuck in systems, architecture, etc that they built. Opportunity to build whole new set of apps that cycle faster with IT.

4:14 Netbooks are the next generation of the small device that OLPC was trying to talk about. Particularly interesting is price point. Eventually it will make sense for operators to subsidize. Can make services and advertising revenue; today's aren't completely done; Linux could be big.

4:14 Search, financials, etc questions coming over. On search side, economy question. Query growth remained strong for a while, our data indicates still there. CPC has been declinng, was negative in last quarter Any trends you can update on how you play through a more difficult economic environment?

4:15 Economic situation pretty dire. Combination of what we've seen does not appear to have a bottom. People are using the Internet more. Obviously will affect online ad market because our systems are so tightly tuned. It will eventually be reflected in CPC, CPM. We are not immune to this. We may be better positioned from ad perspective, but ultimately the real pain felt by companies worldwide will sometime translate to our world.

4:17 Any data points positive? Every data point we have is obvious. Queries shifted from morgages to mortgage help to foreclosure help. Things you see on TV are really true. Areas most hit on online world are same in offine world: Travel, automobiles, financials, etc. Consumers are smart because they use the internet to look for discount trips, etc. From our perspective, aside from our perspective, running the businesses much more tightly, haven't fundamentally changed our strategic view. Trying to make profits from businesses we weren't trying to before.

4:18 Taken a position that the person should be the search. Your viewpoint, history, etc. (With your permission.)

4:19 We like to generate cash. A good metric in any situation is if you can grow profits in absolute basis, you're going to get through this. Patrick (CFO) is particularly good at doing business reviews. Going through systematically. During hypergrowth period, didn't have budgeting and esitmation systems in place we do now. Google managenent spends lots of time doing business reviews now. A lot of that coming. When we get past fear, advertisers understand notion of guaranteed sale.

4:20 What were learnings from P&G swap? Have been able to translate? CPG trying to figure out how to use the Internet. Many don't understand how to market inside online communities. Put people in their buildings, we put them in ours. We changed the way we market to consumer goods companies by talking to them not so much on traditional text queries, but how you can use targeted online ads within blogging communities, Facebook, those sorts of groups.

4:22 Consumers spend a lot of time online before they make purchase. Tend to join affinity groups. Diapers being obvious example.

4:22 Going to do employee swap with other companies. I don't want to talk about specifics, that's their data. But we like that model. Direct contact helps effect change.

4:24 Online continues to gain share. Worth trying to figure out when this will occur. Everyone sort of assuming that 2009 is tough year. What can we do now? Sales force goes in and says you need revenue now, here's how. Many people stuck with contracts with offline channels. Increasing willingness to try new systems in enterprise. We have a set of enterprise offerings and have been pleased with willingness for customers to now accelerate trials.

4:25 What does 2010 look like? Depends on what growth rate of recovery is going to look like.

4:25 Let's talk about music videos. You haven't monetized it yet. Selling music via Amazon and iTunes with some of most-used videos. How do you see both artists using that venue over next 1-2 years as they're dealing with their own contracts, and how do you see monetization of YouTube playing out?

4:26 YouTube is slowly getting monetization right. Taking us much longer than we had hoped. Always been concerned that aggreg monetization of online is not going to replace offline. Potential conundrum for video and movie industries. Music industry has this problem: In 1980s, self view was that they helped create MTV by giving them licenses to music videos "too cheaply." How do you compensate music industry for things that are promotional? Apple successfully has worked that out with iTunes. Very positive example. We need an analogous example of how music videos will work on the Internet. YouTube good with music videos, sports, humor. Working on longer form content and HD. If we can make even a small amount of profit, because of scale, can add up quickly.

4:28 Financial results for media companies is not good. Trajectory that local and broadcast TV is on is similar. Is it possible that group of players who have been standoff to YouTube may change their view given that economic situation is different? We understand their problem, critically dependent on them for professionally produced narrative. My view is you asked question in the wrong order. Right view is: What does future look like? And how do you adapt? Fact of the matter is that mobile devices is going to be majority of how people get information. Mobile power will keep increasing.

4:30 Highly personal, location, etc. Don't know how it'll be monetized. But products are getting built. Challenge and opportunities is to make money. But you won't get there by suing your users or by preventing that technology from happening. It's going to happen.

4:31 Mobile clearly will pass computer. Depends on growth rate of data capable mobile devices. Monetization of ads should be higher because better targeting. When you have powerful browser like iPhone, BlackBerry, Android -- people spend many more searches when they finally have a capable browser. So: What's new in technology sense? And development of new, open-source browser really creates new. How long does it take? A few years, but not a few decades.

4:33 Some of Android devices will look like phones; some not like phones. I think people in the room understand how platform businesses work; it's all about momentum.

4:34 Carriers are looking for new sources of data revenue. Some of carriers subsidizing other devices (like netbooks). Another new thing that will serve as accelerant.

4:35 With Japan, now partnerships with 2 of 3 mobile providers. Monetization is excellent. When you get it right, with right ad product and right search product on device, know that as a proof point. Now intending to replicate those sorts of deals. Obvious prize will be China. That's sort of the next really, really big one.

4:36 M&A pretty inactive right now.

4:37 Stimulus program? I have a very long and strong answer. In the interest of time: We benefit when our customers have jobs, that they buy stuff. Any solution that gets the middle class to feel more confident benefits Google, our advertising revenue, our customers and shareholders. Can debate the specifics. No one's ever done it before at this scale. With respect to how Google benefits beyond that; has $20 billion of payment subsidies and credits to build out more broadband. Also $20 billion in science funding, which will help lag with some new applications.

4:38 Always a danger when you have a Website that you temporarily overmonetize. Works for a quarter or two, then customers say heck, that's an ad page, and they move somewhere else. Google at "coverage level" of about a year ago. Within a range of what we've historically done. Social networking has a lot of pageviews, but don't monetize as well as text search. Where is next source of revenue? Next source is current business functioning better. Next and adjacent is a set of display businesses and an exchange being built from DoubleClick business. Display not uniform; Balkanized. By hand or poor quality spreadsheets in many cases; think we can work Google magic on that.

4:41 Thoughts on Twitter; evolves as real-time search engine, and haven't really responded there. How do you foresee that as a potential threat to Google? In favor of all these potential communication features. Just set up Google account on Twitter. Got character count wrong! 140, not 160! Poor man's email systems. They have aspects of an email system but don't have full offering. Do they fundamentally evolve as sort of a note phenomenon, or storage, identity, etc. Or do email systems evolve? In Google's case, we have a very successful IM product. Twitter's success is wonderful, shows you there are many ways to communicate, especially if you can do so publicly.

4:43 US likely to have quicker descent, quicker recovery. Also believe India and China effected, but to a lesser degree. What does it do for long-term capital structure of these economices? Talking about Japan's recession. Americans love their credit cards -- basically have to solve the credit problem, get jobs stable, housing crisis. When those things are done, reasonable bet that Americans will go back to what we do best, which is to spend money.

4:46 Confident that we're going to see some good things come out of it. American story is innovation. Etc.

4:48 What are 3 things that need to get done to get display to become part of business? First problem if you have a display property, multiple vendors building ad exchange. Heuristics are terrible. Standardization of ad formats. Need more. Especially around interactive and video ads. Future is an ad that brings you in, tells narrative. Best ads add real value. Video, story, narrative, etc. Third is construction of business relationship with large advertisers, which we're still working on.

4:50 If two competitors merge, how do you see potential impact if MSFT and YHOO come together? I don't know if that scenario will occur. We did best attempt to do deal with YHOO. Carol is a fine and able CEO. What do I really think will happen? The problem has to do with Microsoft's ability to use its Windows monopoly to restrict consumer choice. Anything MSFT will do are of concern. That's what we worry about. As long as technologies are competing on fair basis, that's great.

Interactive Advertising Revenues to Reach US$147 Billion Globally by 2012

Interactive Advertising Revenues to Reach US$147 Billion Globally by 2012, According to The Kelsey Group’s Annual Forecast

During the forecast period, global directional advertising revenues, comprising local search, print and Internet Yellow Pages, will grow to US$41.4 billion

Princeton, NJ (Feb. 25, 2008) -- The global advertising market grew to just over US$600 billion in 2007, according to The Kelsey Group, the leading provider of research, data and strategic analysis on directional and interactive local media. The firm expects global ad revenues to grow at a compound annual growth rate (CAGR) of 2.7 percent and reach US$707 billion in 2012, propelled in large part by considerable growth in the interactive segment.

According to “The Kelsey Group’s Annual Forecast (2007-2012): Outlook for Directional and Interactive Advertising,” interactive advertising revenues will increase significantly from US$45 billion in 2007 to US$147 billion globally in 2012, representing a 23.4 percent CAGR.

“It’s no surprise that the global advertising industry is experiencing a full-scale shift to mixed-media platforms, with interactive driving a significant share of overall industry growth,” said Matt Booth, senior vice president, Interactive Local Media, The Kelsey Group. “We see Internet development—including increased subscriber/user access and broadband penetration—as a driver of both interactive advertising revenue as well as migration of traditional ad spending to new media platforms.”

Interactive advertising, which comprises search (including local search), display advertising, classifieds and other interactive ad products, grew its share of global advertising revenues from 6.1 percent in 2006 to 7.4 percent in 2007. By 2012 Kelsey Group analysts expect the interactive share of global ad spending will reach 21 percent.

During the forecast period (2007-2012), the United States will see interactive advertising revenues grow from US$22.5 billion to US$62.4 billion (22.6 percent CAGR), with interactive revenues in Canada increasing from US$1.3 billion to US$3.3 billion (21.3 percent CAGR).

The Outlook for Directional Advertising
The Kelsey Group forecasts directional advertising, which comprises local search, print Yellow Pages and Internet Yellow Pages (IYP), will grow from US$33.3 billion in 2007 to US$41.4 billion globally in 2012 (4.5 percent CAGR). The global outlook for each of the three key segments of the directional media market during the forecast period (2007-2012) is as follows:

• Local search revenues will grow from US$2.1 billion to US$6.6 billion (25.5 percent CAGR).

• Print Yellow Pages revenues will decline from US$27.5 billion to US$25.6 billion (-1.4 percent CAGR).
  
• IYP revenues will grow from US$3.7 billion to US$9.2 billion (20.1 percent CAGR).
  

“We expect printed directory revenues to decline in most global markets over the forecast period, though print will remain the most important source of leads for small businesses,” said Charles Laughlin, senior vice president and program director, The Kelsey Report®, and managing editor, The Kelsey Group. “For directory publishers to succeed, they will need to invest time, energy and resources in both channels to minimize the decline in print and maximize the opportunity online.”

During the forecast period (2007-2012), the United States will see directional advertising revenues grow from US$16.4 billion to US$18.8 billion (2.8 percent CAGR), with directional revenues in Canada increasing from US$1.4 billion to US$1.9 billion (5.8 percent CAGR). Canada is one of the markets in which The Kelsey Group expects growth in the print Yellow Pages segment, forecasting a 1.8 percent CAGR for print directories in Canada during the forecast period.

Marketers Make Deeper Cuts

FEBRUARY 23, 2009

The ad outlook has worsened.

Marketers are undertaking more drastic cost-cutting measures now than they projected even six months ago.

According to an Association of National Advertisers (ANA) survey, 93% of responding marketers said they were now making budget cuts—versus 87% in July and August 2008.

Nearly 37% said they plan to reduce budgets by more than 20%. Back in August, only 21% expected to cut that much.

The January–February 2009 survey found that 77% of marketers plan to cut advertising campaign media budgets; 72% plan to cut ad campaign production budgets; and 68% have mandated that agency partners identify additional cuts.

In the summer 2008 survey, 53% of marketers projected their advertising budgets would be cut in the next six months. Fast-forward six months and 71% report budget decreases. While 38% of those polled earlier predicted their budgets would remain the same, only 23% now say their budgets actually stayed level.

“I’m not surprised, given what’s happened to the economy over the past six months,” said Carol Krol, eMarketer senior analyst. “With so many marketers chopping their budgets, traditional media—such as print and TV—will see additional dollars flow online.”

Ad and media agency executives seemed poised for belt-tightening in August, when 63% of them told Reardon Smith Whittaker that the economy had already had a “somewhat negative impact” on their agency, and 14% took an even darker view.

They were right to be gloomy.

Clearly, agencies are feeling the pain. According to analysis by Advertising Age based on data from the Bureau of Labor Statistics, the US advertising and media sector cut 18,700 jobs in December alone.

Ad-Spending Forecasts Are Glum

Estimates Vary, but Economic Crisis Is Expected to Spur Cuts in U.S., Abroad

By EMILY STEEL

For the advertising and media industries, the worst is yet to come, according to some of Madison Avenue's most closely watched forecasts.

Fallout from the global financial crisis will bring cuts in total ad spending next year both in the U.S. and abroad, though predictions vary widely. Publicis Groupe media agency ZenithOptimedia expects U.S. ad spending to drop 6.2% in 2009 to $161.8 billion. WPP's agency GroupM sees a decline of 3% to $157 billion.

Continued growth in emerging markets will help offset declines in North America and Western Europe, according to both firms, which predict that global ad spending will decline by 0.2% in 2009.

Both companies plan to present their forecasts Monday morning at the UBS Global Media and Communications Conference in New York. Their predictions have been keenly anticipated as industry observers seek signs of how severe an impact the economic downturn will have on the ad business.

Another high-profile forecaster, Robert J. Coen, senior vice president and director of forecasting at Interpublic Group's Magna, also plans to present his predictions at the conference Monday. IPG declined to release its forecasts ahead of time.

Forecasts from Zenith and GroupM represent differing views on ad spending in 2008. Zenith says the current ad spending downturn started in the third quarter and has accelerated through the end of the year, with U.S. ad spending down 3.8% in 2008 to $172.5 billion. Group M is predicting that U.S. ad spending increased 0.3% this year to $162 billion.

In addition to weakness in spending from automotive and financial advertisers, GroupM predicts that retailers will be under pressure following the critical holiday sales season. It says that while it has yet to see wholesale cancellations among its clients, advertisers are now watching every penny.

Spending cuts probably will be most severe for newspapers, magazines and radio as advertisers shift dollars to digital media. One bright spot continues to be Internet, which will keep on growing, albeit not as quickly as in recent years. Online ad spending is expected to increase 5% in 2009, down from 16% growth in 2008, according to GroupM. TV spending also should fare relatively well in the downturn. Advertisers are familiar with using that model to build brands, and TV viewing tends to rise in recessions because TV is a low-cost entertainment option, according to Zenith.

Still, these forecasts paint rosier pictures than recent predictions from Wall Street analysts, which also are split.

Just last week, Fitch Ratings cautioned that U.S. ad spending next year would drop between 6% and 9%, in line with the steep downturn experienced in 2001 following the bursting of the dot-com bubble and the Sept. 11 terrorist attacks. That year was the worst ad recession since 1970.

Fitch predicts that the current downturn will extend well into 2010, probably causing broad pullbacks in both the national and the local markets, pressure across a wide spectrum of advertising categories including retail, auto and financial services, and a glut of ad space thanks to the Web and other emerging media.

UBS is forecasting that U.S. ad spending will fall 6% in 2009 but doesn't anticipate the ad spending decline will be as steep as in 2001.

Economy Deals Online Ad Spending a Hit

NOVEMBER 25, 2008

Digital still stronger than traditional

There seems to be more bad news about the economy every day, and falling ad spending numbers are part of the mix. Although online advertising is still on a positive growth curve, that growth is slowing and will dip into the single digits for the first time in 2009.

eMarketer’s revised projection, benchmarked against the latest Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) data, puts online ad spending at $25.7 billion in 2009. That is only 8.9% over the $23.6 billion that will be spent in 2008.

In August, before the full impact of the economic slowdown was revealed, eMarketer predicted online ad spending would grow 14.5% in 2009.

Not only is the new projection lower, but recovery is expected to take longer. In 2010, online ad spending growth will return (barely) into the double digits at 10.9%, and in 2013 it will only hit 13.5%.

Even paid search, which has grown at an outsize pace for years, will see a mere 21.4% rise in spending this year.

Again, the slowing is relative, since paid search spending growth will still outstrip the overall online market through 2009. There’s a reason paid search will stay robust through the economic downturn, according to David Hallerman, senior analyst at eMarketer.

“Especially in economic turmoil, search is more trackable than any other ad format,” said Mr. Hallerman. “At this stage, it is a tried-and-true format that is supporting online growth.”

Online ads defy slowing global economy

Market expected to grow by 23% this year to $43.3 bil

By Leo Cendrowicz

Oct 9, 2008, 11:13 AM ET

BRUSSELS -- Defying a slowing global economy, the online advertising market is expected to grow by 23% this year to $43.3 billion, according to the Berlin-based European Information Technology Observatory.

Despite the damage inflicted by the financial crisis, turnover with advertisement banners, sponsored links and other online advertising format will grow 13% to $18.6 billion in the U.S., still by far the largest market in the world.

Although the Internet economy in Europe is growing from a smaller base, it is developing fast and is forecast to grow 31% in 2008 to $12.4 billion. The next biggest market, Japan, will surge 15% to $4.5 billion, while China will leap forward 46% to $1.6 billion.

The 2008 forecasts come on top of a 26% jump in 2007 to $35 billion, and before that, a 33% rise in 2006 to $27.8 billion.

The figures showed that the Internet had established itself as an advertising medium and is increasing in importance compared to classic TV, radio and print advertising, EITO chairman Bruno Lamborghini said. He pointed to forecasts for television advertising for 2008 -- up only 8% to $189.6 billion -- that offered far more modest growth.

Marketing Spending Priorities Shift

OCTOBER 7, 2008

Digital looking good. Traditional may take a hit.

More than six out of 10 (63%) of marketing executives surveyed said they had increased their digital marketing spending in 2008. Just slightly less (59%) said they had decreased traditional marketing spending.

These were two of the main findings of a study of 175 CMOs and marketing executives released in September 2008 by Epsilon.

There are far more than 175 CMOs in the US (not to mention the world), but the survey does provide directional confirmation of an ongoing trend: Digital ad and marketing spending are increasing even as traditional ad and marketing spending shrink.

Total ad spending seemed poised for a hit, with nearly two-thirds of respondents saying it would fall as a result of the economy.

Business-to-consumer (B2C) marketers surveyed by Duke University's Fuqua School of Business for the American Marketing Association in July 2008 likewise predicted double-digit growth for Internet marketing spending and low growth for traditional ad spending through the following 12 months.

Gap Widens in Online Advertising

Rivals Struggle to Catch Up to Google As Buyers Favor Search Ads Over Display

By JESSICA E. VASCELLARO
September 4, 2008

Spending on Internet advertising is climbing at a healthy clip -- rising 20% in the U.S. in the second quarter -- and growth forecasts are strong despite the weak economy. But that growth isn't being enjoyed by everyone.

The gap is widening between spending on simple search ads, Google Inc.'s core turf, and spending on flashier display ads, which companies such as Yahoo Inc. and Microsoft Corp. had hoped to use to gain ground on Google.

Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ads that appear on search-result pages. Search-ad spending is on track to reach $10.4 billion this year, double what will be spent on display ads, according to research firm eMarketer.

That divergence of fortunes may be bad news for companies counting on a comeback for display ads, which ruled the Web in its early days. Though Yahoo and others say they have seen demand for these ads as they introduce technologies that better target the ads, they have been slow to regain favor.

CreditCards.com is typical. Jody Farmer, vice president of strategic marketing for the credit-card portal, says he has experimented with buying display ads. But as the economy tightens, the site, which spent $30 million on online marketing last year, is focusing on search ads. "We have to be a little more thoughtful about how we spend our money," he says.

The trend comes as Google rivals Yahoo, Microsoft and Time Warner Inc.'s AOL have invested billions of dollars in building and buying new display-ad technology to deliver more relevant and engaging ads to users on their sites and on the sites of other Web publishers. They hope to win back advertisers who have poured money into search ads.

Mark Scholz, global search manager for Hewlett-Packard Co.'s printer division, says that while his budget is relatively flat, he is spending more on search ads by pooling together funds from product groups eager for the extra lift they are accustomed to from search campaigns. "In the event there are budget cuts, I am one of the last ones they go after," he says.

Google, with more than 70% of the U.S. search-ad market, has much to gain from the trend. But the Mountain View, Calif., company also has made some big bets on the display business. Google is trying to tap brand advertisers to buy display ads on Google-owned properties such as YouTube and on other sites. Tighter display-ad budgets could hamper that expansion, which it fueled with its acquisition of DoubleClick last year for more than $3 billion.

The gap between Google and its rivals could widen as search grows faster than display. Search ads are forecast to represent 42% of overall U.S. online ad spending in 2008, according to eMarketer, up from 40% in 2007. Display is expected to stay flat, at about 21% of overall spending.

Google's rivals caution that there is a wide mix of display-advertising types and that some are performing well in the current environment. Spending on display ads is forecast to reach $5.2 billion this year, up from $4.5 billion in 2007.

Brad Goldberg, Microsoft's general manager of search, said the company has a number of advertising products for which the tough economic environment is a boon, including a new cash-back shopping search service.

Lynda Clarizio, executive vice president of AOL, says the company has the mix of ads that marketers are looking for in a downturn, even though it doesn't have a traditional search business.

A Yahoo spokesman says investments in new display technologies helped the company meet its financial goals in its most recent quarter, despite the tough economic environment. And he notes that Yahoo's U.S. search businesses is growing briskly as well.

There are signs that search may eventually take a hit too. John Aiken, managing director of research firm Majestic Research, says some smaller businesses have begun cutting back the number of keywords they are buying in recent months, although large marketers continue to spend freely. He says Google is "potentially stretching for dollars," noting that it has begun displaying more ads for some keywords.

Nick Fox, director of business product management at Google, says more ads may be showing up for some keywords because, as advertisers spend more on search, Google has more relevant ads to show. "We are not making any short-term trade-offs," Mr. Fox says.

Where Have All the Online Travelers Gone?

AUGUST 25, 2008

The number of travelers booking online is down. What's up?

This year US travel sales booked online will reach $105 billion, up 12% from 2007.

eMarketer forecasts that US online leisure and unmanaged business travel sales (including airline, hotel, rental car, vacation package, intercity rail and cruise) will reach $105 billion. Furthermore, from 2007 to 2012, sales will increase at an 11.6% average annual rate.

Even though online travel sales are growing, fewer travelers are booking their trips online.

"The fact that fewer travelers are booking online is not due to economic concerns—online travel bookers are an affluent demographic—it is caused by frustrations related to the planning and booking capabilities of online travel agencies," says Jeff Grau, senior analyst at eMarketer and author of the new report, US Online Travel: Planning and Booking. "This, in turn, is spurring a renewed appreciation for the expertise and personalized services offered by traditional travel agents."

In other words, online travel sites are steering customers back to offline travel agents—a complete turnaround of what has been happening in the category for the last decade.

"Not so long ago industry observers cast traditional travel agents as has-beens," says Mr. Grau. "Perhaps this has helped them to focus on what they do best: provide travel expertise and personalized service."

Customer dissatisfaction with online travel agencies (OTAs) stems specifically from unfriendly booking engines and navigation tools.

With few points of differentiation, OTAs have a hard time building customer loyalty and have driven travelers right into the open arms of traditional travel agencies—and new online competitors.

"Mired in old technology, the OTAs have failed to keep pace with a newer and more innovative breed of travel Websites built around user-generated content," says Mr. Grau.

Online travel communities are emerging to carry the torch of innovation.

"In addition, a new breed of matchmaking travel sites is bringing traditional travel agency talent online," says Mr. Grau. "Sites like Zicasso and Tripology help travelers to exotic locales find travel agents tailored to their interests and needs."

Online Ad Industry Dealmakers Busy Despite Dull Economy

Despite a weakening U.S. economy during the past year, the level of investment deals and acquisitions involving companies in the online advertising world have remained healthy, says a new report by ContentNext Media.

The "Online Advertising Deals Report" focuses on activity between the second quarter of 2007 and the second quarter of 2008. During the period, there were 160 venture capital investments in the industry, according to the report. Most but not all of those -- 137 -- revealed financial information; disclosed investments added up to more than $1.9 billion.

ContentNext estimates the overall investment in online ad companies during the period -- including the investments where money wasn't revealed -- totaled more than $2.1 billion with the average investment coming in at about $14 million.

In a quarter-to-quarter comparison, ContentNext says that, while the number of investments in online advertising companies declined slightly, the money involved increased by about $100 million, going from $300 million during Q2 of 2007 to $400 million during Q2 of 2008.

The researchers said 100 acquisitions took place during the period. Financial details were revealed for only 46, but ContentNext estimates the value of both disclosed and non-disclosed acquisitions to be $20.5 billion. It noted that 16 acquisitions occurred during Q2 of 2007 while there were 26 in the second quarter of this year.

In both investments and acquisitions, there were some mammoth deals during the past year, notes the report. It cited Federated Media and Glam Media raising at least $50 million in investment money.

Then, notes the report, there was the Big Kahuna of acquisitions: Google's April 2007 purchase of Doubleclick for $33 billion, a deal that made even the $6 billion acquisition by Microsoft of aQuantive and Yahoo's acquisition of Right Media for $680 million seem small.

The Google/Doubleclick deal could be seen as proof that, as Kent State University Practitioner-in-Residence Lauren Rich Fine writes in the report, "ad networks are all the rage."

Fine added that while most ad networks are "only as good as the inventory" they can amass and rarely have exclusive rights to Web sites, "they are extraordinarily powerful as a way to monetize more pageviews and allow larger marketers to put more meaningful dollars to work."

Indeed, ad networks were the most active sector for both investments and acquisitions. ContentNext found 78 ad network company investments and 44 ad network acquisitions during the period.

It said service companies [defined by ContentNext as third-party companies offering advertising and/or marketing solutions online, such as Greenfield Online] were the next most active segment, with 33 investments and 39 acquisitions. They were followed by technology companies such as Ripple Networks, businesses that are creating online ad solutions including platforms, marketplaces and new algorithms. ContentNext found 27 investments and five acquisitions involving technology companies.

Google might have topped the list in terms of money spent, but it was AOL that compiled the most acquisitions during the period, says the report. AOL engaged in eight transactions, followed by Aegis Group with six, Microsoft with five, Google with three and Meredith Corp., also with three.

Draper Fisher Jurvetson led in terms of the amount of investment in the industry. ContentNext said the firm was involved in five rounds of investment. Second on the list was Mayfield China with four rounds, according to the report.

ContentNext Network Editor and Publisher Rafat Ali said the huge Google/Doubleclick deal might skew any analysis based purely on deal dollars. He said he found it more educational to look at the less flamboyant activity.

"The point is not necessarily the full total values of deals," said Ali. "What's more interesting are the small mid-level deals. For me, the more interesting activity is on the venture capital side where innovation is happening."

One place investment money did not seem to be going was search advertising, according to the report.

"Surprisingly, pure search advertising plays are limited, while more entrepreneurial investment is going into emerging categories such as social media, video and behavioral," it says.

Ali believes Google's dominance of the search sector is the likely explanation. "It does show the concentration of power in terms of Google," he said. "Because of Google's dominance, startups are worried about starting anything in search advertising and trying to take on Google."

Portals Unfazed by Economy

AUGUST 19, 2008

Online ad revenues keep climbing, especially for Google.

Google had strong financial results for Q2 2008, and online ad revenues for the top four Internet portals (Google, Yahoo!, MSN and AOL) will continue to grow through the US economic downturn. In fact, eMarketer predicts that Google's online ad revenues will increase by 27.4% in the US in 2008.

The top four Web portals in the US still account for more than one-half of all online advertising revenues.

"Even as Google's main competitors—Yahoo!, MSN and AOL—take in smaller shares of the entire US Internet ad market, 25.7% of all US online ad dollars will flow through those three portals, in contrast to 30.7% for Google alone," Mr. Hallerman added.

Among the top four portals, Google's share of online ad revenues nearly doubled to 57% in 2007 from 30% in 2004, according to Collins Stewart.

Online Ad Spending Update

AUGUST 13, 2008

Continued double-digit growth

eMarketer predicts that advertisers in the US will spend $24.9 billion online this year. That estimate is slightly lower than the one eMarketer released in March 2008, which said that US online advertising spending would reach $25.9 billion in 2008.

The lowered estimate still represents an increase of 17.4% over 2007.

"Even as the potent mix of a misfiring economy and consumers' changing media habits shave advertising dollars from traditional venues, such as newspapers and television, Internet ad spending will continue to grow rapidly," said David Hallerman, senior analyst at eMarketer.

Increased digital ad spending is coming out of traditional media budgets.

Although TV ad spending is set to increase by 7.1% in 2008 to $72.6 billion, eMarketer predicts such spending will actually shrink in 2009 by 2.6% before resuming 1% to 2% growth in 2010 and 1011.

Newspapers are taking an even harder hit. Borrell Associates predicted in March 2008 that newspaper ad spending in the US would fall from $50.8 billion in 2007 to $45 billion in 2012.

China on track to become world’s No. 2 ad market in 2010

Ad spending in China is expected to grow more than 20% this year and almost 20% in 2009 triggered not only by Olympic-related expenditures but also growing consumer power and urbanization, according to a new study from GroupM.

The report, “This Year, Next Year: China” is part of GroupM's media and marketing forecasting series drawn from data supplied by holding company WPP's worldwide resources in advertising, public relations, market research, and specialist communications. It includes forecasts for advertising spending in all major media.

“We’re confident of strong media investment growth extending to 2009 as demand in China becomes an increasingly important source of growth for global marketers as well as Chinese companies focusing on brand-building,” said GroupM Futures Director Adam Smith, who oversees all “This Year, Next Year” reports. “Growth in 2007 was relatively restrained, but we predict many marketers are conserving funds for the anticipated Olympic bonanza this year.”

The report said the Beijing Olympics will play a key role in accelerating media investment growth 22% to $35 billion, an increase from 2007 but below the explosive 29% annual compound average of 2001-2007. The report also forecast a 19.5% hike in spending to $42 billion for 2009.

In global terms, Smith pointed out that China will supply 23% of an anticipated 5.8% growth in global ad spending in 2008 and 30% of an expected 4.5% global growth in 2009.

The report pointed out that last year China overtook Germany to become the world’s third-largest ad market behind the U.S. and Japan. It is expected to fall within 10% of Japan in 2009, which, with Japan now in or near recession, should be an easy gap for China to close in 2010.

The report identified television and the internet as the primary engines of ad growth in China, especially this year with the Olympics generating an estimated $400 million in spending on CCTV, China’s national television network and the exclusive Olympics broadcaster. The figure represents six% of all new media investment in the nation in 2008.

The internet is expected to command 7.3% of ad investment in 2008, rising to 8.5% next year, the report said, noting that it is China’s fastest-growing medium and is on track to become the second-largest advertising medium after TV within a few years.

“China has the world’s largest internet community with more than 250 million users,” said Smith. “That’s an increase of more than 90 million from June of last year, representing a year-to-year growth of more than 55%.”
The report also revealed the following:

Rising incomes and consumer price inflation will fuel consumer expenditures, translating into increased sales for marketers. Per capita disposable income in China grew 120% in urban areas between 2000-2007, from $816 to $1812 currently. Retail sales tripled (at current prices) between 2000 and 2007, a development that contributed significantly to the report’s growth forecast.

Beyond 2008, retail distribution will extend to all 600 smaller cities throughout China as marketers will spend more money developing new consumers to balance with more developed markets like Shanghai and Beijing.
Online gaming is coming to play a vital role in internet advertising in China. In 2007, 120 million online gamers resulted in a huge growth in embedded advertising in online games. E-commerce also is growing despite low credit card penetration, with 46 million consumers shopping online in 2007. By 2010, an estimated 100 million-plus Chinese consumers are expected to shop online.

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."

Online ad spending should grow 20 percent in 2008

Posted by Jim Kerstetter 1 comment

The economy may be lousy, but the amount of money spent on online advertising should continue to grow at double-digit rates all the way through to 2013, according to a report released Monday by JupiterResearch.

Total online ad spending is expected to increase just a little less than 20 percent this year, from $19.9 billion in 2007 to $23.8 billion. By 2013, Jupiter expects total online ad spending to hit $43.4 billion. (For you stat aficionados, that's a compound annual growth rate of 13 percent. By comparison, offline advertising is only expected to have a CAGR of 4 percent over the same period.)

The online world's share of advertising is also expected to increase, but there's still plenty of room to grow. Last year, Jupiter says online ads accounted for 8.4 percent of total ad spending in the U.S. That's expected to grow to 9.6 percent this year, 10.7 percent next year, and 14.3 percent in 2013.

Not surprisingly, search advertising should continue to be the largest category, growing from $9.1 billion in 2007 to $20.9 billion in 2013. But there's an interesting caveat to Jupiter's research: The growth rate for search advertising should slow toward the end of their forecast because of an "inability to tap into small local US advertisers and a steady maturation of the U.S. paid search market."

Display advertising and classified advertising aren't expected to fare quite as well. Because of short-term economic problems, display advertising growth should drop slightly, but rebound for 14 percent annual growth over the full period of the report.

Likewise, classified ad spending is forecast to be 20 percent of the total online ad market, while growing at annual 9 percent rate.

But look out for video advertising. Jupiter predicts that static and text ads will account for 63 percent of banner advertising in 2008, but that share is expected to drop to 41 percent by 2013 as advertisers look to rich media and video. Video advertising, in fact, is expected to quadruple to $5.1 billion in 2013.

Mass Mag Exodus Continues as Brands Follow Men Online

JVC, SoCo Are Still in Spin, but They're Focusing on Outlets Such as Heavy That Deliver Flexibility, Results

By Nat Ives

Published: May 26, 2008

NEW YORK (AdAge.com) -- Some magazine publishers hoped that this year would see marketers shake off their exuberance for digital media. Perhaps, amid a sober reassessment of the actual results from so much digital experimentation, print could even recapture some of the ad spending lost to the internet.

Fat chance.

Instead, a combination of forces led by the broad economic slump is delivering as challenging a year as ever for traditional publishers. You can see it when you look at macro measures such as the number of ad pages sold into print magazines for their issues through June, which came in 5.5% lower than in the first half of 2007, according to the Media Industry Newsletter.

'Turn Me On': Bawdy music video featuring JVC's El Kameleon car stereo has more than 300,000 views.

And you can see it when you visit individual fronts in the battle, such as the young men's video site Heavy -- which is now playing a bawdy music video it created to promote the JVC El Kameleon car stereo. JVC has pulled out of titles such as Playboy and Forbes this year to concentrate on digital marketing, outdoor advertising and events such as the Crue Fest 2008 tour.

"FHM has gone away, and Stuff magazine has gone away," said Chad Vogelsong, general manager-marketing at JVC Mobile Entertainment. "Every year, those magazines that our core reads are shrinking. Magazines are not the way young males are being entertained anymore. ... So I decided to get away from those more-traditional media angles and focus more on viral through partners like Heavy."

Still in print
Starting next month, Heavy will add branded entertainment on behalf of Southern Comfort, which chose not to repeat its recent buys in titles such as Rolling Stone and Maxim.

Nobody is leaving print entirely; Spin has managed to retain both JVC and SoCo as advertisers, and both brands are still using niche magazines, too.

Nor are magazine publishers passively taking the losses. Magazines including Forbes, Playboy, Maxim and Rolling Stone have built websites that go well beyond their print editions, offering exclusive video, mobile updates, blogs, widgets and special ad units. Magazine companies are investing in ad networks such as Jumpstart Automotive Media, acquired by Hachette Filipacchi Media U.S. in April 2007, and partnerships such as the deal between Hearst Magazines and YouTube to build magazine-branded video channels.

Magazine sites attracted 70.7 million unique monthly visitors during the first quarter of the year, up 11.9% from the first quarter of 2007, according to a Magazine Publishers of America report last Tuesday. That's a much faster rate of growth than the internet as a whole enjoyed in the same period.

But advertisers' priorities, methods and media partners are clearly continuing to change.

Heavy investment
"It was time for us to make a bigger bet in the digital arena," said Campbell Brown, VP-director, Southern Comfort Americas.

That's partly because Mr. Brown wanted to expand the impact of the growing SoCo Music Experience, a festival that kicked off its fourth year May 17 in Atlanta. Heavy is recording backstage conversations, band performances and crowd interviews to run on its music channel through November.

"We're not a small brand, but we're not a goliath either, so you really have to make decisions based on affordability -- and you want guarantees," Mr. Brown said. "Digital offers some flexibility for delivering on original promises that you may not be able to find in print."

JVC's video, called "Turn Me On," was played some 300,000 times in its first week. It's been downloaded more than 1,000 times for reposting on visitors' MySpace pages, Facebook profiles or personal blogs, said John Lumpkin, senior VP-sales strategy and partnerships at Heavy, "which in the magazine world would be the equivalent of ripping out an insert, running down the street and showing it to all your friends."