U.S. Online Advertising Market to Reach $50B in 2011

The U.S. online advertising market will reach $50.3 billion in revenue by 2011, more than doubling 2007 levels and growing 24 percent annually (CAGR), as brands increase their online ad spend and publishers improve ad targeting, inventory and yield management, according to the Yankee Group, writes MarketingCharts.

The internet accounts for approximately 20 percent of overall media consumption in the U.S., but advertisers now invest only 7.5 percent of their budget online - and as a result there is tremendous potential for marketplace growth as advertisers bridge the gap, Yankee said.

By 2011, nearly 25 percent of all media consumption will be online, drawing 15 percent of the advertising dollars, according to the recently published Yankee Group research report, “The Cowboys Dance On… and On: 2007 Online Advertising Forecast.”

(See chart of online ad market and internet access growth, 2006-2001.)

Among the factors driving this continued growth, according to the research:

• Increased online audiences (at least 76 percent of U.S. households now have internet access, and adoption will outpace population growth in the next five years)
• The development of new types of advertising
• The creation of new publisher business models that help sell interactive advertising

Yankee Group also provided some predictions for the online advertising market:

• Search will get bigger before it gets smaller; it accounted for 40 percent of 2006 online advertising and is forecast to grow to nearly 50 percent before its share shrinks.
• Don’t say good-bye to the “dancing cowboys” animated ads yet. Such low-CPM (cost per thousand) ads will continue to drive much of the revenue growth even as high-CPM brand advertisers shift their budgets online.
• Privacy will remain a sticking point with users.
• Social networks will merge into the media fabric (though questions remain whether they are the cornerstone of digital media or the “better mousetrap” of the ad server business).