I just had to write this post about the explosive growth in the online advertising space. It seems our market is growing very fast even in these times of uncertainty.

I subscribe to email blasts from a company called Mediapost. I get several emails each day with cool stats about the online industry including search and social media. Sometimes I just delete the emails based on the title, and sometimes I glance through the emails and try to glean some good nuggets of info. A couple of days ago I got an email that was titled: "Web #2 Ad Medium in 5 Years" Hmmm…that piqued my interest, so I opened it.

Recently the IDC (not sure what IDC stands for) released a study that forecasts and analyzes US Internet advertising for 2008-2012. Overall, the Internet advertising revenue is expected to roughly double from $25.5 billion in 2007 to $51.1 billion in 2012.

There are some very interesting little tidbits in this study, which happens to cost about $4500 to purchase. I’m not crazy enough to purchase the entire study (Click Here if You Are), but the excerpts seem promising…here is the Cliff’s notes version:

Essentially they are stating that the Internet will rise from the number 5 advertising medium up to the number 2 medium by the end of 2012. This will make advertising revenue larger than cable TV, newspapers, and broadcast TV. Direct marketing will remain in the top spot, according to the study.

It seems that video advertising will be responsible for the single biggest revenue percentage gain; it is anticipated that video advertising on the Internet will grow sevenfold from $0.5 billion in 2007 to $3.8 billion in 2012, which gives it an annual compounded growth rate of 49.4%. As any good rapper would say…"Unhhh…how you like me now?" A sevenfold increase in 5 years…all I can say is WOW…that is an industry that I want to be a part of. Just slice me off a little piece of that revenue and I’ll be happy. The IDC study also anticipates that brand advertisers will shift significants amounts of their budgets into video commercials; mainly taking away from their current efforts on both broadcast and cable TV.

What’s the reasoning behind this massive growth in the online video advertising space?? I think it’s because advertisers are starting to realize that people are sick of being told what to watch and when to watch it. The Internet allows people the freedom to choose what they want to watch and when…so why not cater to that desire?

Some other conclusions that the IDC study came to are

  • Search will still remain the king. Search ads hit $10.4 billion in 2007 and is expected to grow to almost $18 billion in 2012. However, search advertising as a percentage of Internet advertising is expected to go down from 41% of the market share last year to about 34% in 2012.
  • As stated previously, online video will explode over the next 4 years and it will expand its Internet advertising share from 2% to 7.4%.
  • Another big mover in this space will be referral and lead-generation services. These services will see the second largest market share gain and will grow from $2.3 billion in 2007 to $5.9 billion in 2012.
  • Surprisingly, the IDC forecasts mobile advertising to only grow to "just shy" of 1 percent of the overall market share. Although this is a fast growing market, I expected mobile advertising to be a little stronger.

As you can see, lots of good news in our industry. I’m excited about the prospects and the growth rate. This study just helps solidify my decision to operate a business in this industry…let’s just hope that the study is accurate. 🙂

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