New Media Poised to Drive Ad Revenues

  |  May 12, 2006   |  Comments

Ad revenues on the Internet will remain strong despite low expectations for traditional channels, a new forecast indicates.

The Internet, interactive TV and satellite radio will continue to be the drivers of growth for U.S. ad revenues, according to the 2006 Advertising Forecast from Kagan Research.

The Internet remains the strongest-gaining sector in advertising, averaging 57 percent growth per year over the past 10 years. In 2005, the channel increased by 24 percent. New channels experiencing the most growth last year include satellite radio (235 percent) and interactive TV (116 percent).

Revenues from more traditional channels experienced lower rates of increase. In 2005, total ad revenue, including traditional and interactive channels, grew by 3.9 percent to reach $240 billion. Ad revenues are expected to reach $400 billion by 2015, Kagan finds.

Lower rates of growth are attributed to a lack of local advertising. In both local and national advertising, there has also been some migration to the Web. "The problem is mostly at the local levelÂ… You've seen some new areas on the international front like the Internet and satellite radio," said Kagan Research Senior Analyst Derek Baine. "Advertisers have been kind of waiting for new platforms to develop."

Traditional sectors like TV have made moves to hold onto ad dollars; many traditional media are creating properties on the Internet.

"The question is, can traditional ad media morph and take advantage of the Internet and do partnerships with their own Web site, or will dollars migrate from them to other companies like Yahoo and Google?," said Baine. "So you're seeing some of the cable networks have been very aggressive in developing new applications on the Internet, mobile and interactive channels.

"That's the wave of the future for those who act quickly and jump on the media," Baine said.

The Kagan Research report forecasts ad revenues through 2015 with industry projections in 15 major advertising segments.

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