Worldwide internet advertising revenue will grow from $16.9 billion in 2006 to $31.3 billion in 2011 at a compound annual growth rate (CAGR) of 13.5%, according to a new report from IDC.
IDC adds that 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 consumer use.
As US marketers keep moving 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.
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% in 2006 to 32% in 2011 as video advertising grows.
This decline poses a strategic challenge to Google, says IDC, since more than 99% of its income stems from search advertising.
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 ads) 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!, and the other players depends on how fast video ads will grow and how well the media companies will be able to capitalize on it.
Karsten Weide, program director, Digital Marketplace: New Media and Entertainment at IDC, said: “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.”
A recent report from IAB Europe revealed that online advertising spend in Europe doubled last year to £4.5 billion (see European Internet Adspend Doubled In 2006).
Meanwhile, a forecast from TNS Media Intelligence said that internet display advertising will lead the advertising market in 2007 with 16% growth (see US Adspend Forecast To Increase).
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