’05 Forecast: Online Ad Spend to Grow 11 Percent

Online ad spend — excluding paid search — will increase 11.2 percent this year over 2004, according to a forecast by TNS Media Intelligence.

That’s more than double the 5.1 percent growth rate TNS predicts for ad spending overall, which is forecast to exceed $150 billion for the first time (the figure does not include Yellow Pages or classifieds).

“Coming off a very strong 2004, we see strong indications that advertising spend will continue to grow this year,” said Steven Fredericks, president and chief executive of TNS Media Intelligence. “Online ad spend will continue to lead that growth across all media.”

One distinguishing characteristic of 2005 versus last year is it won’t include the advertising spend associated with the Olympics and an election season. Consequently, TNS predicts overall ad spend for the second half of 2005 will increase only 3.5 percent over the second half of 2004. However, Fredericks doesn’t expect this to affect Internet ad spend growth this year.

“I don’t believe that online will suffer at all in terms of year-over-year growth compared to 2004,” he said.

The TNS forecast follows in the wake of two other notable ad spend projections released in the last two months. Jack Myers predicted online advertising will grow 30 percent in 2005. The December report from Universal McCann’s Robert Coen, meanwhile, predicted 25 percent online growth and 7.4 percent growth in advertising overall in 2005.

Because TNS Media’s calculations don’t include paid search, the fastest growing online advertising category, overall growth for ’05 will be higher than the 11.2 percent forecast, Fredericks said. But even with search, which accounts for 35 to 40 percent of all online ad spend, factored into the mix, the forecasts of 25 percent or higher by Myers and Coen are a bit overzealous, he opined.

“Those numbers just sound high to me,” Fredericks said.

According to TNS, online ad spend grew 21 percent in 2004 and 16 percent in 2003.

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