Tuesday, June 10, 2008

According to a recently released study by IDC, the U.S. Internet Advertising 2008-2012 Forecast and Analysis, overall Internet advertising revenue will double from $25.5 billion in 2007 to $51.1 billion in 2012. During the forecast period, Internet advertising will grow about eight times as fast as advertising at large.

The Internet will go from the number 5 medium all the way to the number 2 medium in just 5 years, says the report, making it bigger than newspapers, bigger than cable TV, bigger even than broadcast TV, and second only to direct marketing.

Video advertising will be the principal disruptor of Internet advertising during this time, as its revenue grows sevenfold from $0.5 billion in 2007 to $3.8 billion in 2012 at a compound annual growth rate of 49.4%. Brand advertisers will shift significant amounts of money into video commercials, primarily from broadcast television and to a lesser extent from cable television.

Karsten Weide, program director, Digital Media and Entertainment, says "What will (help) drive this trend is that consumers are starting to realize that, as opposed to TV, Internet video lets them watch what they want, when they want, and increasingly, where they want."

IDC concludes that

• Search ads will remain at the top of the Internet ad hierarchy with revenue at $10.4 billion last year, reaching almost $18 billion in 2012. IDC believes search, now having almost 41 percent of the market share, will have just above 34 percent by 2012.
• Online video ad spending will grow from about $500 million in 2007 to $3.8 billion in 2012 and its Internet advertising share will expand from 2 percent to 7.4 percent.
• Referral and lead-generation services will see the second strongest market share gain, says IDC. Revenue from referral and lead generation services will grow from $2.3 billion in 2007 to $5.9 billion in 2012.
• Mobile advertising will also show robust growth but the segment will still have "just shy" of 1 percent of the overall online ad market by 2012.