Web Will Account for 15 Percent of Total Ad Spend in 2010

Despite continued sluggishness in the display ad market, Internet advertising will increase its share of overall ad spending to 15 percent next year, for a total of almost $65 billion globally, according to a new forecast from GroupM.

The dollar amount represents an 11 percent increase over 2009, when Online is expected to account for 13 percent of total ad spending worldwide. Digital advertising will account for a slightly larger share of the total in the U.S. at 17 percent ($24.4 billion), up from 15.4 percent in 2009 and 13.9 percent in 2008.

“Despite the recession and the budget-cutting mindset advertisers are in, we are still seeing a net increase in digital investment,” Adam Smith, futures director of GroupM, which is part of The WPP Group, said.

Unlike earlier this decade, when spending on display ads drove much of the growth in the digital market, increases today are being driven by investments in search and mobile advertising, according to the forecast, which was released Monday.

Spending on search will rise by 12 percent globally in 2010 for a total of $25 billion, the report said, while global display ad spending will increase just 5 percent. In the U.S., display ad spending will decrease slightly, from 35 percent of the total to 34 percent. Display ads accounted for 39 percent of total US ad spending in 2006.

Mobile advertising’s share is predicted to reach 6 percent globally in 2010, reaching a total of $3.3 billion, a 19 percent increase over 2009. GroupM estimated that mobile ad spending was at $2.4 billion in 2008, and that much of the growth has been fueled by the popularity of Apple’s iPhone.

Smith pointed to the worldwide economic recession as the prime reason advertisers are shirking display ads for search. “In previous recessions it was always direct marketing which seemed to have a good time,” Smith said. “The reason for that is you get instant results and you can measure them, and I think that really is at the root of this.”

Nonetheless, he suggested that marketers’ perception of search may not always match the reality, particularly as consumer spending remains tight. “The fact is paid search is getting a little less efficient, because there is less consumer demand out there and fewer conversions to capture,” he said. “But it is still far and away the most efficient form of direct marketing. ”

In the U.S., much of the growth is being driven by search and video advertising, while sponsorships and display ads continue to contract. Part of the reason for that, in addition to a recession-driven disillusionment with display, is the continued glut of inventory versus lighter demand. Display advertising continues to grow globally because certain regions, particularly Asia Pacific, are simply “further behind the curve,” Smith said.

Not surprisingly, the growth of digital continues to come at the expense of traditional media, specifically television and print. The forecast said that newspapers in particularly will continue to feel sharp declines in 2010.

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