Following last year’s dramatic comeback in online ad spending, the industry was expecting things to cool down this year. So far, that hasn’t happened, judging by the Q1 spending figures released by the Interactive Advertising Bureau, which recorded a 23 percent increase in dollars over the same period last year, while IDC analyst Karsten Wiede reports that for the first time, Yahoo (NSDQ: YHOO) is no longer the online display advertising market leader — Google (NSDQ: GOOG) is.
IAB: In Q1 2011, online ad spending was $7.3 billion — about the sixth consecutive quarterly record-breaker since the 2008-2009 recession hit, causing the IAB to place minus signs in front of its percentages. That all seems like a distant memory at this point. The IAB didn’t break out segments for display and search, but it’s safe to say that display has been the considerable growth driver, especially with video and mobile gaining double digits each year. It’s worth pointing out that last year’s Q1 growth was 25 percent, so the remaining high levels of increases are a very good sign that the industry is on solid footing going into the summer. Release
IDC: At the moment, every major media company is trying to figure out how to better tap local online advertising dollars, especially with the explosion of local deals that have brought in smaller merchants. Naturally, some may wonder if those efforts can pay off. In the case of the Google Display Network, it is. According to IDC’s Weide, Google was able to best long-standing display leader Yahoo by focusing on small- to medium size businesses, which had already been in Google’s fold thanks to search ads.
On top of that, Google, like everyone else, is benefiting from the growth that the IAB counted in Q1.
Specifically, Google’s net U.S. display ad revenue share grew to 14.7 percent in Q1 from 13.3 percent in Q4. At the same time, Yahoo’s declined from 13.6 percent to 12.3 percent. ?¨?¨Weide writes: “We expect further pressure on traditional display ad publishers such as Yahoo!, Microsoft (NSDQ: MSFT) and AOL (NYSE: AOL). GDN for now does not threaten them directly since their primary client base are brand advertisers, while the GDN for now mostly attracts SMBs. But that may change, and when that happens, the old stalwarts’ lumbering sales organizations will have to compete with GDN’s ultra-effective automated sales interface. Longer term, Facebook will threaten both traditional publishers and Google; Facebook’s revenue is still comparatively small, but it is growing fast and already attracting brand advertisers.”
Other highlights from the IDC report on display:
— Worldwide online ad spending grew by 14.3% from $15.9 billion in 1Q10 to $18.2 billion in 1Q11.
— U.S. spending increased by 14.2% from $7.1 billion in 1Q10 to $8.1 billion in 1Q11.
— IDC forecasts U.S. spending to grow 13.3% to $8.3 billion in 2Q11 and 13.8% growth for the entirety of 2011, with total 2011 spending coming out at $34.6 billion versus $30.4 billion in 2010.
— For the ninth quarter in a row, display advertising continues to grow faster than search advertising, with display’s share growing while search’s share declined. Display’s share today is at 33.3% compared with 29% two years ago, while search declined to 48.7% (compared with 53.4% two years ago).
— Yahoo!’s search ad network revenue (i.e., the amount of revenue realized through sales of text ads on third-party Web sites) continued to collapse, likely due to a mishandled transition from Yahoo!’s own search engine to Microsoft’s Bing. Yahoo!’s U.S. TAC estimated payouts to search ad network partners were at a normal level in 3Q10 at $248 million, then failed to generate two-thirds of that in 4Q10 ($77 million payout), and then fell to one-tenth of the original amount in 1Q11 ($24 million payout). Yahoo! CEO Carol Bartz blamed the bad performance not on a lack of clients but on a lack of clicks due to an underperforming Bing search ad platform. But it does seem that whoever tested Bing’s performance on the Yahoo! search advertising network prior to the agreement has not done a very thorough job.
— Google’s net U.S. search ad market share rose to 59.6% in 1Q11 (59.1% in 4Q10); Microsoft stayed at second, with 7.9% (7% in 4Q10); and Yahoo! stayed at third, with 7% (8% in 4Q10).