Online ad spending should grow 20 percent in 2008

The economy may be lousy, but the amount of money spent on online advertising should continue to grow at double-digit rates all the way through to 2013, according to a report released Monday by JupiterResearch.

Total online ad spending is expected to increase just a little less than 20 percent this year, from $19.9 billion in 2007 to $23.8 billion. By 2013, Jupiter expects total online ad spending to hit $43.4 billion. (For you stat aficionados, that's a compound annual growth rate of 13 percent. By comparison, offline advertising is only expected to have a CAGR of 4 percent over the same period.)

The online world's share of advertising is also expected to increase, but there's still plenty of room to grow. Last year, Jupiter says online ads accounted for 8.4 percent of total ad spending in the U.S. That's expected to grow to 9.6 percent this year, 10.7 percent next year, and 14.3 percent in 2013.

Not surprisingly, search advertising should continue to be the largest category, growing from $9.1 billion in 2007 to $20.9 billion in 2013. But there's an interesting caveat to Jupiter's research: The growth rate for search advertising should slow toward the end of their forecast because of an "inability to tap into small local US advertisers and a steady maturation of the U.S. paid search market."

Display advertising and classified advertising aren't expected to fare quite as well. Because of short-term economic problems, display advertising growth should drop slightly, but rebound for 14 percent annual growth over the full period of the report.

Likewise, classified ad spending is forecast to be 20 percent of the total online ad market, while growing at annual 9 percent rate.

But look out for video advertising. Jupiter predicts that static and text ads will account for 63 percent of banner advertising in 2008, but that share is expected to drop to 41 percent by 2013 as advertisers look to rich media and video. Video advertising, in fact, is expected to quadruple to $5.1 billion in 2013.

[jaybaer]

I totally agree that search spending will eventually slow. Already, Google is taking in a disproportionate share of PPC ad dollars (They have 71% share of search (Compete) and 85% share of ad dollars (Covario)). That means that a lot of marketers are paying a lot more for clicks, and eventually people are going to pull back on their PPC budgets. If costs per click continue to spiral upward, it won't make sense forever, even if PPC is the most efficient type of marketing available.

Jason Baer
http://www.convinceandconvert.com