The Internet’s share of total media ad spending is rising by at least 1 percentage point every year. Two counterbalanced trends are producing those rapid gains: Marketers spend more on Internet ads, while spending less on advertising placed in other media, such as newspapers, radio and magazines. These spending shifts predate the recession, but the current economic forces both reinforce the new advertising models and make them more permanent.
There is good news and bad news for total online ad spending.
The good news is that despite the economic crisis, total online ad spending will rise in 2009 to a record high of $24.5 billion. After this year’s incremental $1.1 billion gain, eMarketer projects online ad spending will continue to reach new heights each year through 2013. Considering how marketers are spending less in 2009 on all other major measured media, even nearly flat growth will be seen as an accomplishment.
There are four reasons for the continued expansion:
- Many marketers find Internet ads more measurable than ads on other media. Not only does that create a relatively safe haven in tough times, but more-measurable tactics are more likely to pass muster when budgets are tight.
- Marketers see Internet ads as more targetable, and that makes for more-efficient spending.
- Marketers continue to rebalance their overall ad budgets, moving a greater share online to more closely match the increasing time people spend there.
- In general, companies will continue to shift a percentage of ad dollars away from newspapers, radio, magazines, yellow pages, direct mail and even TV to interactive channels.
However, the Internet is a heterogeneous medium. Growth is uneven. Video advertising, for example, is still rapidly gaining ad dollars, while marketers will spend substantially less on static display ads (banners) in 2009 than just the year before.
Going forward, eMarketer estimates a degree of online ad spending recovery in 2010, as the economic crisis starts to ease up. That 9.4% increase will likely be due to two main elements: a gain in search spending, as consumers open up their wallets and click more on commercially focused search ads; and more brand marketers seeing online video advertising as a mainstream method for enhancing their overall campaigns.
By 2012, a more normalized economy combined with the Internet’s increasing share of marketers’ budgets and a national election/Olympics cycle will produce a 13.5% spending jump.
Digital marketing offers compelling benefits, especially for cash-poor companies. For instance, marketers can more readily measure the results of Internet advertising than with most traditional media, both during campaigns and after they are completed. Those capabilities help produce more-efficient advertising and higher ROI, which in turn push traditional media to compete with lower pricing. However, when traditional media offer lower pricing in an environment where they are already losing market share, that can further erode their position.
At the same time, successful Internet advertising creates a new paradigm for marketing on other media. Search is the prime example of this new model. When marketers link ads to an individual’s stated interest at the precise moment that interest is expressed—as with a search query—the high relevance breaks down the usual resistance. Advertising that consumers welcome is the new reality, combining effectiveness with efficiency for marketers. And in the not-so-long run, that’s where the money will go.
Find out more about eMarketer’s digital marketing and the new report “US Advertising Spending: The New Reality”