Online Ads Hit $50 Billion By 2011; Local Reaches $9B By 2012; Pre-Roll, Embeds Gain In '08

Online Ads Hit $50 Billion By 2011; Local Reaches $9B By 2012; Pre-Roll, Embeds Gain In '08


With all the doom and gloom hovering over the economy right now, analyst reports heralding brighter days for the future of internet ad spend continue to be released.

Below are three separate reports offering prognostications for online ad spending from a general perspective, another with a strictly local viewpoint and, lastly, an examination of streaming media:

-- Online ad spend doubles in five years: According to the Yankee Group, the U.S. online ad market will hit $50.3 billion in revenue by 2011 - more than double 2007’s revenue. The underlying reasons for this rosy picture rests on the disparity between current media usage and spending by marketers. The web claims roughly 20% of overall media consumption in the U.S. right now - but advertisers currently invest only 7.5% of their budget online. The gap will start to be bridged by 2011, when Yankee predicts that online will comprise nearly 25% of all media consumption and 15% of the ad spend.

-- Healthy, with caveats: As a number of forecasts and recent ad spend tallies have noted, online advertising’s growth remains healthy. But the law of large numbers, for one thing, has led to a gradual slowdown in the rate of those gains. Another reason for the slower growth, often cited by groups like the Interactive Advertising Bureau, is the lack of reliable metrics. But if a sustained recession hits the U.S., that could diminish that growth even further, complicating predictions such as this one.

-- Local online ads close in on $9 billion by 2012: Separately, JupiterResearch projects local online advertising will grow at a CAGR of 13% from 2007 to 2012, coming in at $8.9 billion. That’s faster than online advertising as a whole, which Jupiter expects to rise a CAGR of 12%). Display and search ads are the main drivers, with CAGRs of 18% and 16%, respectively, over the next five years. Meanwhile, online local classified advertising, which is a relatively much larger and more mature market, will grow at a CAGR of 10%. But within that category, there is significant room for growth, particularly in the case of web-based real estate ads, which Jupiter argues has not attained its real potential.

-- Opportunity for online in the housing crisis: Jupiter even finds a possible silver lining for internet real estate classifieds. If the housing slump deepens, it could lead sellers and agents to rely on local web advertising, because of the lower cost and wider range of services offered by sites like Zillow and Trulia..

-- Streaming media remains strong: Also this past week, Dublin’s Research and Markets issued its assessment of streaming media, with a look back over the past five years and a forecast for 2008. It estimated that the size of the market for both streaming audio and video ads in 2006 was $990.3 million, up 128% over 2005’s $433 million. Although it couldn’t sustain that level in 2007, Research and Markets forecast 40% gains for streaming media in 2007 to $1.38 billion.

-- Pre-roll vs. embeds: Research and Markets anticipates pre-roll ad revenues to have made up 26.7% of gross video expenditures in 2007 and 28.5% in 2008. In comparison, embedded units made up an estimated 58.8% last year. This year, embeds’ share is forecast to comprise 55.9%. The billings of gross pre-roll ads are estimated to have come in between $36-$43 million per month last year.

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