Internet Ad Spend Creeping up on TV

Internet advertising revenue is growing at a faster clip than television advertising, which could slowly begin losing its global share of revenue in 2007, according to the latest ad spend predictions from ZenithOptimedia

“The Internet is easily the fastest-growing medium — Internet ad spend grew 21 percent in 2004 and we expect it to grow in double digits in each of years we forecast. However, the Internet is by no means the sole driving force of growth: the traditional media are pulling their weight as well,” said Jonathan Barnard, knowledge management manager at ZenithOptimedia.

Television and Internet will continue to grow their share of global ad revenue this year, with TV spending gaining 0.1 percentage point and Internet spending gaining 0.2 percent of share. Predictions for newspapers, magazines and radio all dropped slightly, while cinema and out of home remain flat.

TV is expected to gain 0.2 percent of share in 2006, while Internet will add 0.3 percent. The turning point for TV could come in 2007, when it is expected to lose 0.1 percent of share, while Internet spending gains by 0.3 percent.

“In most developed markets, TV is starting to lose its power as a mass medium. It’s also not growing as much in developing markets,” Barnard said.

Much of the shift to other types of media results from a shift in advertiser types. In developing markets, the first advertisers in those markets have been multinational consumer packaged goods (CPG) manufacturers, who have traditionally turned to TV for branding ads. As markets develop, other kinds of advertisers, with other preferred media, shift the balance away from TV.

The Internet attracted 3.6 percent of total ad spend in 2004, up from 3.2 percent in 2003. It has a 5.4 percent share in the United States and a 7.7 percent share in Sweden, the country with the highest Internet penetration in the world. Its share is still growing in both countries. The weak point is in Latin America, which lags behind other areas, but shows some signs of strength, according to Barnard.

“The Internet’s share of world ad spend could easily double in the longer term; we expect it to rise to 4.4 percent by 2007,” Barnard said.

Ad spend in the traditional media — excluding the Internet — grew 7.0 percent in 2004, and is forecast to grow 5.1 percent in 2005, 6.2 percent in 2006 and 5.7 percent in 2007, he said.

There are several factors that point to the growth in online ad spend remaining strong, in contrast to the “bubble” of the late 90s, according to Barnard.

“The type of advertiser is different. There are several well-established brands that have been testing the waters for the past few years, and are now convinced of the effectiveness of Internet ads,” Barnard said. “They’re poised to spend large amounts of money online.”

In addition, the improvements in analytics gives direct-response marketers an immediate reading o the effectiveness of online ads, so they know any spending they do will have a positive effect on sales, as opposed to the hit-or-miss ad plans of the bubble days, he said.