Technology | Media | Telecommunications

Tuesday, June 10, 2008

Explosive Growth of U.S. Internet Advertising

Internet advertising in the U.S. will continue to grow fast even as the current economic woes will lead to a contraction in ad spending overall -- essentially accelerating the transfer of marketing budgets from traditional media into new digital media.

During the forecast period, Internet advertising will grow about eight times as fast as advertising at large. IDC finds overall Internet advertising revenue will double from $25.5 billion in 2007 to $51.1 billion in 2012.

The Internet will go from the number 5 medium all the way to the number 2 medium in just 5 years -- making it bigger than newspapers, bigger than cable TV, bigger even than broadcast TV, and second only to direct marketing.

Video advertising will be the principal disruptor of Internet advertising over the next five years by attracting the most new marketing dollars. Its revenue will grow sevenfold from $0.5 billion in 2007 to $3.8 billion in 2012 at a compound annual growth rate (CAGR) of 49.4 percent.

This growth will take place because brand advertisers will shift significant amounts of money into these video commercials, primarily from broadcast television and to a lesser extent from cable television.

"The size of the online video audience as well as the time it spends watching video is sure to increase as broadband access penetration increases, connections become faster, and as more premium content is available," said Karsten Weide, program director, Digital Media and Entertainment.

"What will also drive this trend is that consumers are starting to realize that, as opposed to TV, Internet video lets them watch what they want, when they want, and increasingly also where they want."

Search advertising will remain the one advertising format that will garner the most revenue over the forecast period in the United States. This means that for any media company, search must be a key part of its strategy.

According to IDC's assessment, all media companies will need to address this growing segment -- even if Google is towering way above all others as segment leader with about 70 percent share of the segment's revenue.