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The US online advertising market will reach $50.3 billion in revenue by 2011, more than doubling 2007 levels and growing 24% annually (CAGR), as brands increase their online ad spend and publishers improve ad targeting, inventory and yield management, according to the Yankee Group.

The internet accounts for approximately 20% of overall media consumption in the US, but advertisers now invest only 7.5% of their budget online – and as a result there is tremendous potential for marketplace growth as advertisers bridge the gap, Yankee said.

By 2011, nearly 25% of all media consumption will be online, drawing 15% of the advertising dollars, according to the recently published Yankee Group research report, “The Cowboys Dance On… and On: 2007 Online Advertising Forecast.”

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Among the factors driving this continued growth, according to the research, are…

  • Increased online audiences (at least 76% of US households now have internet access, and adoption will outpace population growth in the next five years)
  •  The development of new types of advertising
  • The creation of new publisher business models that help sell interactive advertising

Yankee Group provides some key predictions for the online advertising market, including:

  • Search will get bigger before it gets smaller; it accounted for 40% of 2006 online advertising and is forecast to grow to nearly 50% before its share shrinks.
  • Don’t say good-bye to the “dancing cowboys” animated ads yet. Such low-CPM (cost per thousand) ads will continue to drive much of the revenue growth even as high-CPM brand advertisers shift their budgets online.
  • Privacy will remain a sticking point with users.
  • Social networks will merge into the media fabric (though questions remain whether they are the cornerstone of digital media or the “better mousetrap” of the ad server business).

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