September 27, 2006

According to the latest numbers compiled by eMarketer, Web advertising spending is set to increase over 26 percent in 2006 to over $15.8 billion, down a bit from 2005's rate of slightly under 30.4 percent.

Such growth slowing down is consistent with the more than 2.1 point drop from 2004 to last year, and signals a potentially more mature market. However, according to Geoff Ramsey, CEO of eMarketer, Internet advertising can support more sustainable growth in the coming months.

"Total media in the U.S. is growing at about 4.8 percent for 2006 to put this in perspective," Ramsey said. "Even the Internet is not immune to some economic hiccups, and we're seeing slow but subtle signs that consumer spending is not what it could be at this point."

To arrive at its projections, eMarketer considers the estimates of several marketing research firms, including Jupiter Research, TNS, Forrester and nearly 20 other analyst firms and financial researchers.

It combines such data with surveys of its clients, and other independent research. Its figures are constantly updated and revised with real-time results, so even the news from Yahoo last week that it was seeing softness in ad sales in certain verticals is weighed into the calculations, though that plays only a small role, Ramsey said.

"Any Internet marketer can have a rough time with a particular segment, but that doesn't mean everyone else is," Ramsey said. "Yahoo does control about 18 percent of total online ad spend, so if they have a stumble, it's going to effect our numbers at some juncture."

Although growth is slowing down a bit, the overall increase that remains is likely to be sustainable growth, Ramsey said. For next year, eMarketer expects even more modest growth of less than 15.2 percent, followed by a 17+ percent growth in two years from now.

Even as Internet advertising spending growth slows, US online ad spending will continue to increase, from $15.9 billion in 2006 to more than $21 billion in 2008, well surpassing $25 billion by the end of this decade. That growth puts Internet ad spending on course to overtake radio for the first time in 2008 as a percentage of total ad spend. For 2006, more than 5.6 percent of all ad dollars are going online, and for 2007 that figure is expected to rise to more than 6.3 percent, reaching almost 9 percent in four years from now.

Overall, paid search continues to garner the lion's share of online ad spend, accounting for more than 40 percent of each year's spending from 2005 through 2010.

That scenario could very well continue to increase as more advertisers buy rich media ads, including online video, which will double from a 9 percent share this year to 18 percent 4 years from now. Display ads will drop slightly from 21 percent to 17.8 percent over that same period.

Source: Click Z