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Online Ad Spending to Reach $42B by 2011 - Budget Shift to Accelerate

Advertisers are well on the way to spend $21.4 billion on the internet in 2007, according to eMarketer’s new online ad spending report, “U.S. Advertising Spending,” which also projects that by yearend 2011 spending on online advertising will reach $42 billion, reports sister site MarketingCharts.

(See chart of U.S. online advertising spending, 2001-2011.)

eMarketer also projects that U.S. online advertising’s share of total media ad spend will more than double, from 6 percent in 2006 to more than 12 percent share in 2010 - and more than 13 percent in 2011.

The amount of online ad spend per internet user is also growing and will, this year, for the first time surpass $100 per user, eMarketer also said; and, by 2011, advertisers are expected to spend nearly double that amount online per user.

One big trend is that the nation’s largest advertisers are shifting more of their budgets from traditional media to the internet, according to eMarketer:

• Among Advertising Age’s “100 Leading National Advertisers,” 69 allocated a smaller share of their total ad budgets toward the four traditional measured media - TV, radio, newspapers and magazines - in 2006 than in 2005.
• 58 of those advertisers both decreased their spending share on the four traditional media and increased the share going to the internet.
• Combined, the 100 top advertisers spent nearly $230 million less on the traditional four media in 2006 compared with 2005, while boosting internet ad spending by $558 million.

Search, display and classified ads account for the largest advertising share of Internet spending, according to eMarketer’s projections for the 2006-2011 period (see table of U.S. online ad spend forecast by format, 2006-2011):

• Paid search’s share of online ad spend will continue to hover in the 40 percent range through 2011.
• Display ads (such as static banners) will generate about 20 percent of internet ad revenues through the decade.
• Classified ads, including those on newspaper sites and in places such as eBay, Monster or HotJobs, will contribute about 17 percent.
• Rich media, which includes video advertising, will rise from 8 percent share this year to over 13 percent in 2011.
• Social-networking advertising numbers, currently being revised by eMarketer, are expected to increase from $900 million in 2007 to $2.5 billion in 2011.

While the current total media ad spending forecasts reflect economic anxiety, a downturn will also affect online ad spending - but less so, according to David Hallerman, author of the report:

• In contrast to the 26.7 percent growth projected for internet advertising in 2007, total media ad spending will increase only 2.1 percent.
• Mainly because of the credit crunch and related economic fallout, internet ad spending will not increase as much in 2007 and 2008 as analysts previously expected. However, reduced spending will be tempered by advertisers buying the low-cost display advertising gobbled up by mortgage companies’ shrinking marketing budgets.
• As a highly accountable ad format, paid search are likely to get more of the mortgage companies’ shrinking budgets than display ads.