Online To Hit Nearly 7.5 Percent Of Total '07 Ad Spend; On Track For 10 Percent In '08: Forecast


Despite some economic weakness, and diminished display ad spending from the mortgage industry, online ad spend will be up 26.8 percent over last year — $21.4 billion — accounting for 7.4 percent of the total ad spend, according to the latest forecast from eMarketer. And online ad spend is still on track to attract one in every 10 dollars spent in 2008. Gazing further ahead, online’s part of the pie could reach at least 13 percent by the end of 2011 with a total ad spend of $42 billion. More near term, eMarketer predicts that Q4 ad spend will hit $6 billion. Among the other highlights in the report:

— Although 69 of the 100 largest US ad spenders put smaller budget shares into four traditional media: TV, radio, newspapers and magazines in 2006 than in 2005, 70 companies in that same group put larger shares into online ads. Also, 58 did both; they reduced their traditional spending share and increased their online share.

— Demonstrating the likelihood of online’s continued resiliency, eMarketer notes that in a year when its total ad spending fell by 19.8 percent, General Motors increased its internet spend by 14.7 percent last year.

— Although eMarketer does not expect growth rates to pass the 30 percent mark again this decade, as they did from 2004 to 2006, the flow of political ad spending in 2008 along with the summer Olympics will boost the annual increase to 28.5 percent.

— The share of online ad dollars going to paid search will hover in the 40 percent range through 2011. Display ads are expected to generate about 20 percent of internet ad revenues. Online classifieds will contribute about 17 percent – or a bit less, eMarketer says, hedging its bets – to the spending pie. More details in the Release

I spoke with David Hallerman, the senior analyst at eMarketer who prepared this latest research estimate, in between sessions at the Ad:Tech conference in NYC on Wednesday. In addition to the report, we discussed eMarketer’s revised 2007 ad spend numbers as well as some general thoughts about the ongoing transfer of ad dollars moving from traditional to new media, the fate of newspapers and the impact of Facebook’s and MySpace’s new ad targeting initiatives. More after the jump.

Online ad growth: “To say growth is slowing down is to say it’s not going to be over 30 percent in the U.S. In other words, online ad spend is still strong. However, for this year, we’ve shaved our estimates from 28.6 percent to 26.8 percent.” Overall, for 2007, eMarketer original forecast $21.7 billion in online U.S. ad spend; that has has been revised slightly downward to $21.4 billion.

Facebook and MySpace impact: Don’t expect a major boost in ad spend from Facebook’s new ad programs: “MySpace and Facebook both have the label of social networking. But more and more, a large portion of their sites is really content/marketing.” Whether people will accept the notion of embracing a brand as a friend remains to be seen, though it will be a factor in advancing behavioral targeting forward.

Fate of newspapers: Over the past few weeks, reports such as the Audit Bureau of Circulations’ FAS-FAX numbers and the Newspaper Association of America offered more evidence of the shift of print readers to online. Hallerman: “You need 10 online readers to equal every print reader.”

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