The Internet Advertising Bureau (IAB) and PricewaterhouseCoopers came out with amazing news about the digital advertising industry recently.
On November 12, they issued a news release headlined: “Internet Advertising Revenues In Q3 ’07 Surpass $5.2 Billion, Setting New High.” That was followed by the subhead: “Industry Maintains Record-breaking Trend; 2007 Q3 Revenues Up Over 25% From 2006 Q3.”
Wow! If that doesn’t say it all and validate the hot air we’ve been blowing all year, I don’t know what does. The IAB-PricewaterhouseCoopers report notes revenues for the first nine months of 2007 totaled $15.2 billion, up nearly 26 percent over the $12.1 billion recorded during the first nine months of 2006. Just look at this growth trend:
— Source: Interactive Advertising Bureau, 2007 —
And an eMarketer report says online advertising will be $21.4 billion in 2007 and grow to $42 billion by 2011, according to Reuters.
The eMarketer report says online ad spend this year will surpass $100 per user and that by 2011, “advertisers are expected to spend nearly double that amount online per user.”
According to Reuters, the spending breaks down like this:
- Among Advertising Age’s “100 Leading National Advertisers,” 69 allocated a smaller share of their total ad budgets toward the four traditional measured media – TV, radio, newspapers and magazines – in 2006 than in 2005.
- 58 of those advertisers both decreased their spending share on the four traditional media and increased the share going to the Internet.
- Combined, the 100 top advertisers spent nearly $230 million less on the traditional four media in 2006 compared with 2005, while boosting internet ad spending by $558 million.
- Search, display, and classified ads account for the largest advertising share of Internet spending, according to eMarketer’s projections for the 2006-2011 period.
- Paid search’s share of online ad spend will continue to hover in the 40% range through 2011.
- Display ads (such as static banners) will generate about 20% of internet ad revenues through the decade.
- Classified ads, including those on newspaper sites and in places such as eBay, Monster, or HotJobs, will contribute about 17%.
- Rich media, which includes video advertising, will rise from 8% share this year to over 13% in 2011.
- Social-networking advertising numbers, currently being revised by eMarketer, are expected to increase from $900 million in 2007 to $2.5 billion in 2011.
What does this mean for us in the online marketing and advertising industry?
It means advertisers and marketers have truly woken up to the power of online advertising and have embraced its high level of measurability and accountability. As Peter Petrusky, director of entertainment, media, and communications practice for PricewaterhouseCoopers, put it, “Internet advertising revenues are on an annual run-rate exceeding $20 billion, further demonstrating the industry has truly come into its own.”
Assertions in a William Blair/CIMA study earlier this year are valid as well. That report said growth in search was leveling off (something we’re seeing) but growth in online display and especially rich media is taking off. PricewaterhouseCoopers echoed these findings with additional comments from Petrusky: “The emergence of new platforms, including broadband video, rich Internet applications, mobile, and social media promise to deliver new benefits for consumers, and create exciting new venues for marketers to realize value in digital media.”
It means that agencies big and small should see a lot more work. Randall Rothenberg, IAB’s chief executive, said, “Marketers large and small have come to accept digital media as the fulcrum of any marketing strategy.” We’re seeing this as well with all clients (even our search-only clients are saying, “OK, what else can we do online?”).
Who’s getting hurt?
I’d characterize it more as rapid deflation than a bubble burst. Clearly, print’s in serious trouble and recent figures validate the gloomiest of industry projections. In fact, visions of the e-media landscape as depicted in “Epic 2014,” an eight-minute short on media’s “future history,” which predicts today’s media giants will become afterthoughts, don’t seem that improbable.
Call me old-fashioned, but I enjoy my breakfast with the morning paper. As an online marketer who regularly bashes print’s ineffectiveness, I worry about the future of local newspapers and the fate of independent, high-integrity investigative reporting. Without getting further into what that means for funding quality local and international content, journalism, and democracy, let’s look at the numbers and employment ramifications.
On November 20, Reuters reported that although online spending at newspapers is up, print is way down. According to the Newspaper Association of America:
- Newspaper advertising sales fell 7.4 percent in the third quarter as real estate and help-wanted classifieds slumped.
- Spending on print ads for Q3 07 dropped 9 percent to $10.1 billion for the same period last year, while online ads gained 21 percent.
- Real estate classified ads decreased 24 percent during the period, as slumping demand for housing reduced property listings.
- Employment ads fell 20 percent.
- Automotive classified ads declined 18 percent.
One cannot avoid the headlines: newspapers around the country are cutting back on staff. Last week, for instance, “USA Today” said it would cut 45 positions, or 8.8 percent of its editorial staff. Be prepared to see more of this.
The future is bright for the Net, and I stand by my theory that even if the economy takes a dive, online will prosper.
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