11/15/07

It’s no secret that the online category is where the big growth will be happening in the advertising industry. But, as a percentage of the total ad spend—about 5% last year—it’s definitely been lagging the percentage of time people spend online these days, which is about 20% of the total time spent with all media. Thus, you don’t have to be a rocket scientist to realize we have a major disparity here crying out for adjustment!  But that adjustment has been slow to happen. And that’s because big agencies are just plain slow in adopting new technology, and big advertisers are equally slow in changing their budgets. Basically, the ad industry has been too tied to the past. Well, take notice—because we’re now seeing promising signs of change. Online is definitely picking up steam.

The Interactive Advertising Bureau just reported that online ad revenue in the third quarter of 2007 increased by more than 25%—to a record $5.2 billion. That’s $1.1 billion more than last year’s third quarter, and almost 3% higher than the second quarter of 2007. Quarterly online ad revenue this year has stacked up like so: $4.9 billion in Q1, $5.1 billion in Q2, and $5.2 billion in Q3, for a running total so far in 2007 of $15.2 billion (and that’s before what’s expected to be a big fourth quarter).  This time last year, online ad revenue was $12.1 billion—translating to an increase of 26% so far in ‘07.

Multiple analysts are reporting that online ad revenues will exceed $20 billion this year, attributing this growth to such things as broadband video, social media, and rich online and mobile apps. “It’s the promise of targeting consumers online that’s driving money away from traditional media and online,” said Online Media Daily in a recent story.

Nick Brien, CEO of ad agency Universal McCann, speaking at a recent Interactive Advertising Bureau conference, spoke of a general climate of discontent with traditional ad media.  Online Media Daily quoted Brien as saying certain clients are “just waiting to increase their online spend to 50% or 60% [of their total budgets].” The publication cited projections by eMarketer that Web advertising as a share of total ad spend will reach 7.4% this year, more than 10% by 2009, and at least 13.3% by the end of 2011. The increased spending on online ads, it said, will come from additional allocations and budget shifts from other media, “and TV may be in for the largest losses.”

What are you seeing as far as increased spending for online advertising in your personal experience?  Tell us in a comment below.