ZenithOptimedia: Internet Ad Spending Will Overtake Radio Next Year

Corporate spending on Internet advertising worldwide is “rocketing” while money allocated for campaigns on traditional venues continues to slide, according to a new report.

The study, conducted by London-based ZenithOptimedia, says Internet ad appropriations “will grow six times faster than traditional media between 2006 and 2009” and the Web will increase its share of the ad market from 5.8 percent to 8.7 percent over the same period.

In December, ZenithOptimedia predicted Internet ad spending would overtake radio spending by 2009. But the latest figures prompted the company to revise that forecast. It now expects Internet to bypass radio next year. That would move Internet into fourth position in a ranking of ad media based on total global spending, a list currently topped by television which is followed by newspapers and then magazines.

ZenithOptimedia expects total world ad spend to grow 5.2 percent this year. There is likely to be a bump next year, up to 6.2 percent, as a number of advertising-heavy events take place, including the presidential election in the United States, the Summer Olympics and the European soccer championships.

While the Internet — with a total predicted ad spend in 2007 of $31.3 billion — has a long way to go to reach the $168 billion spent on TV ads, it can hardly be considered a fringe or ancillary medium any longer, said ZenithOptimedia Head of Publications Jonathan Barnard. “It’s now, really, a mainstream advertising medium, and it has overtaken outdoor and radio, two of the longest-established traditional media,” Barnard told ClickZ.

ZenithOptimedia predicts online spending will grow 28.2 percent in 2007, while the rest of the market grows 3.7 percent. It also expects Web ad spending to account for nearly 9 percent of global advertising expenditure by 2009, “and its share should reach double digits early next decade.”

According to ZenithOptimedia, Internet ad spending already consumes more than 10 percent of ad budgets in Norway, Sweden and the United Kingdom. By 2009, the same will be true for Australia, Canada, Denmark, Israel, Japan, South Korea, Taiwan and the United States, it predicts.

Barnard said much of the Internet growth can be attributed to the rapid expansion of broadband access, online video and social networking sites. “Social networking really came into its own last year and will certainly be adding to the momentum this year as well,” he commented.

A 29 percent growth rate is amazing but Barnard said the pace is sure to slow eventually. “I think it will start to slow naturally,” he said. “It can’t continue to grow explosively forever. It’s quite possible that new formats will arrive, but looking at the existing formats, they are starting to mature.”

The report does not break down Internet ads by type. Another ZenithOptimedia study, conducted last year, estimated 35 percent of Internet ad money went to display ads in 2006, 43 percent went to search, 19 percent went to classified, and 3 percent went to other forms including e-mail and mobile.

A big challenge facing ZenithOptimedia, as well as companies trying to analyze ad spending metrics, will be to properly define new medium spending as television, radio, Internet and telephone continue to merge and mingle.

“The lines are blurring,” said Barnard. “We’ve got to think very cautiously about what constitutes an online medium — if, for example, video is delivered over the Internet, the airwaves, cable or satellite. This is a hot topic and its something we are very aware of.”

For the purposes of the new report, ZenithOptimedia defined Internet ads as “basically everything that is transferred over the Internet and viewed on a browser or a dedicated computer program like Windows Media Player,” said Barnard.

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