Lagging Display, Paid Search Force Ad Forecast Down

December 4, 2008

This article is included in these additional categories: Financial Services | Paid Search | Retail & E-Commerce

Advertisers are now expected to spend only $23.6 billion online this year in the US, according to revised figures from eMarketer, which lowered its estimate from the $24.9 billion it predicted in August because of poor performance in display and paid-search advertising categories.

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The new figure still represents an increase of 11.3% over 2007 spending, the firm said, noting that internet advertising will still fare better than traditional in 2008.

Display Advertising Suffering

The revised forecast indicates that display advertising is suffering because many of the vertical industries – such as auto and retail – that are key players for the format are slashing their ad budgets. In August, eMarketer predicted 16.9% growth in display ad spending, but the new predictions show lower growth at 3.9%. Slow growth is expected to continue in this area. At the end of the decade, display will grow just 10% year-over-year.

A positive for display ads is that it is now a buyer’s market, according to David Hallerman, senior analyst at eMarketer.? “There will be more ad impressions online because prices are coming down,” he said.

Paid Search Growth Lowest Ever

Paid search’s growth is lower than it has ever been, at 21.4% this year, dropping to 14.9% next year. But, eMarketer said, it is significant that paid search will grow more than the overall online market both this year and next year at 11.3% and 8.9%, respectively.

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“Search’s share of online dollars will balloon from about 40% of the online market to nearly 50% by the end of the decade,” Hallerman said. “Especially in economic turmoil, search is more trackable than any other ad format. At this stage, it is a tried-and-true format that is supporting online growth.”

About the forecast: eMarketer benchmarks its US online ad spending projections against the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data.

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