While we wait for the fourth quarter of 2011 data on Internet ad spending, the first three quarters provide a robust growth picture. However, at least one organization finds the data not so rosy.
While the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC US) survey on third quarter online ad spending continues to show strong growth, WPP’s Kantar Media’s report on third quarter overall Internet ad spending in the U.S. was actually down 2.9 percent.
Who’s right? If I were a betting man, I would put my money on the IAB report. The IAB is considered the most accurate measure of interactive advertising revenues. Their numbers are compiled directly from data provided by companies selling advertising on the Internet. Their survey is very comprehensive including compiling information on advertising revenue from websites, commercial online services, free email providers and other organizations selling digital advertising.
Compare this approach to that of Kantar which limits its data collection to the top 20,000 sub-domains per month. Their numbers are an estimate based on information that can be scraped off of the Google API.
Kantar estimates that overall Internet advertising expenditures was actually down by 2.9 percent during the third quarter of 2011. Overall online ad spending rose only 2.8 percent for the first nine months of 2011 with progressively slower growth rates each subsequent quarter according to Kantar.
Kantar credits this downturn to reductions in paid search advertising especially by insurance companies, legal services and medical care providers. They estimate that paid search advertising was down 2.1 percent for the first three quarters of 2011.
Contrast these numbers with the more comprehensive report from the IAB. The IAB reports that U.S. Internet advertising revenues were $7.88 billion for the third quarter of 2011. The figures represent a 22 percent increase from the same quarter of 2010. It also marks a 2.7 percent increase from the second quarter of 2011 and is the eighth consecutive quarter of year-over-year growth.
The data indicates that the IAB and PwC’s earlier prediction that overall online spending in 2011 will reach $31.0 billion will be met. eMarketer, which benchmarks the IAB data to its own projections of future online advertising spending, currently projects that online ad spending will reach $50 billion by the year 2015.
Online advertising will more and more consume a larger proportion of advertising budgets. Advertising follows consumers and consumers are spending more time on the Internet. Another reason for the growth in digital advertising is that there are more and more channels for advertisers. For example, consider the growth in the last few years in social media and mobile. In addition, today’s advertisers also have more ad formats than they did a few years ago.
All these factors add up to continued rapid growth in Internet advertising. While the state of the economy will be a factor in the rate of growth of online advertising, there is no stopping this train. Online advertising has become as fundamental as television advertising to today’s marketers. The $50 billion projection by eMarketer is a realistic projection in the eyes of this author.