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U.S. Marketers Moving More Ad Budget to Net

Internet advertising in the United States continues to be both a major business in the Digital Marketplace, as well as providing the funding for most of the Internet services that consumers use.

As U.S. marketers continue moving their available budgets from the traditional media onto the net, IDC forecasts that Internet advertising will grow about three times as fast as advertising overall during the forecast period.

The overall revenue of Internet advertising will grow from $16.9 billion in 2006 to $31.3 billion in 2011 at a compound annual growth rate (CAGR) of 13.5 percent. Search advertising will retain its number one position as the advertising format garnering the most ad spend.

However, even though absolute spending on search advertising will continue to increase, its market share will slowly decline from 40 percent in 2006 to 32 percent in 2011 as video advertising grows.

IDC believes that this decline poses a strategic challenge to Google, the market leader in search advertising, since more than 99 percent of its income stems from search-related advertising revenue.

As broadband penetration has increased and consumers' Internet connections allow for the download of data intensive graphics and video, advertisers' spend on rich media ads -- which include broadband video commercials -- has been steadily increasing. IDC believes that with the expected breakthrough for video consumption and video ads, this market share will grow fast.

The future of Internet advertising -- and of Google, Yahoo!, plus the other players -- depends on how fast video ads will grow and how well the media companies will be able to capitalize on it.

"Broadband video commercials will experience their breakthrough in the coming years. This will create tremendous opportunities, but also threats, for old and new media companies. At the same time, search advertising will lose market share, which may pose a strategic challenge for Google, the Internet advertising market leader," said Karsten Weide, program director, Digital Marketplace: New Media and Entertainment at IDC.

In contrast, I don't see the apparent shift in the marketplace to be a challenge for Google at all, since it's well positioned to make the transition to a greater emphasis on video. However, I do believe that the main threat will continue to be for those traditional advertising and PR firms that are unable to adapt to the broader changes taking place.

It's inevitable that informed marketers will be turned-off by advertising and PR executives that are trapped in the mass-market era, and are incapable of making the journey to a more targeted online media model. Unfortunately, many that were schooled in the "broadcast mindset" have the same essential contempt for the buying public as e-mail spammers.

The rapidly decreasing demand for specialists in one-size-fits-all, indiscriminate and otherwise irrelevant advertising messages means that as the budgets move, so will the talent needs.

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