Online ad spending in the US is growing more rapidly than any other advertising medium, is reaching new peaks seemingly with every passing quarter, and has been projected to see double-digit growth again this year. In fact, the IAB estimates that online ad spending has grown at a compound annual rate of 20.3% in the past 10 years. But to what extent is this meteoric rise attributable to growth in the online user population, as well as inflation? This article pulls together data from various sources to measure the real growth in spending per online user from 2000 to 2011.
Spending Growth Outpaces Online Population Growth, Inflation
In 2011, as the above chart shows, online ad spend per user, in nominal dollars, equaled $131, which is almost 4 times the amount ($36) from 2002, when this figure was at its lowest since the start of the century. When measured against nominal ad spend per user from a couple of years earlier (2000), though, the 2011 figure reveals slower growth. From 2000 to 2011, the data shows that nominal ad spend per user only doubled, from $67 to $131.
(The drop in spend per user between 2000 and 2002 was due to a roughly 25% fall in online ad spend, coupled with a rapid 39% rise in the online population.)
When factoring in inflation by making the spending constant to 2000 dollars, online ad spending growth is more muted, though not necessarily weak. The chart shows that online ad spend per user, in constant dollars, has risen by roughly 50% between 2000 and 2011 (from $67 to $100), and has grown by slightly less than 3x since 2002.
Looking only at the data for 2000 to 2011, then, the data reveals that adjusting for inflation removes roughly half of the spending growth per user. Still, the data shows that online ad spend – in constant dollars – has outpaced online population growth by 50%. (The estimate for number of Americans online has roughly doubled from 2000 to 2011, while spend per user has almost tripled.)
Search Moves to the Fore
Online advertising channels have evolved significantly over the past 11 years. The above chart examines 4 selected segments of online advertising that have been tracked by the IAB and PwC since 2000: display-related; search; classifieds; and email.
Back in 2000, online advertising was dominated by display-related formats, to the tune of 81% share of total spending. With the advent and massive growth of search advertising, though, by 2004, the share of spending held by display-related formats had been cut in half, to 39%, replaced primarily by paid search, which rose from a fractional 1% share of online spending in 2000 to 40% share in 2004. In that time period, classifieds also became more popular, jumping from 10% to 18% share, while email declined, from 3% to 1% share.
Between 2004 and 2011, the patterns changed somewhat. Search continued to increase its share of spend, rising to 47% share of online ad spending in the US by 2011. After its big fall between 2000 and 2004, display-related advertising largely stabilized, though its share in 2011 still hasn’t recovered to levels from 2004 (35% vs. 39%). Classifieds, meanwhile, have accounted for a decreasing share of spend, down almost 50% from 2007 to 2011 alone. And in 2011, email accounted for a fractional 0.7% share of online ad spending.
Search Spend Per User Continues to Grow
Paid search’s growing share of online ad revenues translates into an ever-increasing amount of spending per user, even when controlled for inflation and growth in the online population. Back in 2000, when search advertising was nascent (and the IAB referred to this revenue source as “keyword search”), advertisers spent $0.67 per online user on this channel. By 2004, that had jumped to $18, and this spending has not looked back since, rising to $32 in 2007 and $47 in 2011 (in constant dollars).
While display’s share of spend has largely stalled in the snapshots taken from 2004-2011, rising spending overall means that greater amounts are being spent per user on display-related advertising, too. After taking a tumble from $54 per user in 2000 to $18 in 2004 (due primarily to a loss in spending share), display-related advertising almost doubled in per-user spend by 2011, to $35.
The chart also tells a different story for classifieds. While this segment’s share of spend has been on the decrease, the amount of money spent on this format per user (in constant dollars) in 2011 ($8.14) was almost on par with per-user spend from 2004 ($8.32), when classified advertising was far more popular.
Other Online Advertising Segments Growing, Too
Of course, search advertising is not the only advertising channel to see tremendous growth. Below are a few hand-picked links to recent MarketingCharts articles detailing key trends for other formats – including mobile, online video and social media – as well as for paid search.
- US Social Media Ad Spend to More Than Double by 2016
- Marketers Say Social Media, Search Are Industry’s Hottest Ad Tools
- Facebook Ad Budget Growth Outpaces Paid Search [Update]
- Facebook Ad Revenue Grew 69% in ’11, Now Over $3B
- US Facebook Ad CTR Up 11% in Q2; CPM, CPCs Also Rise
- US Mobile Media Revenue Growth to Outpace 17% Global Average
- Sports, News, Travel Verticals Got Serious About Mobile Ads in Q1
- Digital Video Ad Completion Rates Continue Rising Amid Higher Loads
- Advertisers Seeing Effectiveness of Digital Video
- Tablet Share of Paid Search Dollars Steady in Q3; Engagement Tops PCs
- North American SEM Indus. Value Estimated to Increase by 19% This Year
About the Data: The following method was used to calculate online ad spending per user in constant (2000) dollars:
- 1: Number of Americans online = (% of Americans online, 2000-2011)*(US population estimates, 2000-2011).
- 2: Online ad revenues, 2000-2011 adjusted for inflation using the Bureau of Labor Statistics CPI inflation calculator.
- 3: Online ad spending per user = inflation-adjusted online ad revenues / number of Americas online.
Notes: This article uses data from: the International Telecommunications Union (ITU – tracking the % of Americans online); the US Census Bureau (US population estimates); and the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC – US online advertising spending).
The calculation for the number of Americans online differed from US Census Bureau estimates regarding the online population, which are only available until 2010. The calculation using ITU and Census Bureau population data was used to maintain consistency in tracking multi-year trends.
The IAB spending figures are calculated for each full year, whereas the Census Bureau population estimates are from the Fall of each year (save for 2000, when the estimate is for the Spring). It is unclear from what time of year the ITU data is sourced.
In some cases, the IAB did not provide an aggregate spending amount for the selected online advertising segments. For those years, the total spend in constant (2000) dollars was calculated by multiplying the indicated share of spend by the total revenue figures, and adjusting for inflation.