Research Center >> E-Newsletters

E-NEWS: Tipping Point on the Horizon as Internet Ad Spending Sees Double-Digit Growth
Branding and display ads gathering momentum.
from AICPA Custom Media Solutions

Even when you exclude paid search, online advertising revenue grew to $6.1 billion for the first three quarters of the year -- up by 11.5 percent from the first nine months of 2004, according to a report released last week by TNS Media Intelligence. To put these numbers in perspective, ad spending across all media channels grew by just 3 percent over a comparable nine month period.

The TNS Media Intelligence Report indicated that online growth was not just click-related as large, blue-chip marketers reallocated budgets online, and pure-plays increased their Web spending. "For the first time since the dot com bust, online brands accounted for a majority of Internet ad spending," stated the report.

Some advertising executives agreed that there was a huge growth in display ads this year with the biggest leaps by marketers that use the Web to manage customer relationships. "Where customers can actually transact with them online is where we're seeing them make the investment by leaps and bounds.”

Meanwhile, the Interactive Advertising Bureau reported that all Internet ad spending, including search, reached $8.9 billion for the first nine months of this year -- up about 30 percent from the same time last year. Nearly 60 percent of this volume was not search-related, consisting primarily of display ads and sponsorships.

Tipping Point for Online Advertising?

While online advertising accounts for just five percent of today’s media dollars, many experts expect it to reach a 10 percent share by the second half of 2006.

The speed of online advertising's growth, its benefits to offline campaigns, and recent online ad spending increases from major marketers all seem to be converging, according to Safa Rashtchy, senior research analyst at Piper Jaffray, whose comments appeared in a report released last week.

“We believe we are now approaching an inflection point when online ad spending growth could accelerate," Rashtchy wrote. "This point is likely to be in the second half of 2006, as the full impact of some of the recent allocation increases from major marketers becomes evident and creates a momentum that will attract more spending by advertisers who are on the sidelines now."

Rashtchy's "conservative" estimate is that online advertising will exceed $55 billion globally by 2010, a 27 percent compound annual growth rate (CAGR) over 2005.

"Advertisers are interested in enhancing the effects of both display and search advertising by creating a coherent campaign that reaches the consumers in various types of inventories," Rashtchy said.