Paid Search Leads Global Online Advertising

by Jack Loechner, Jun 17, 2010, 8:15 AM

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According to MAGNAGLOBAL, a division of IPG's Mediabrands, global online advertising will rise by 12.4% in constant currency terms during 2010, to $61.0 billion dollars globally. Accounting for actual and expected changes in currencies over the course of 2009 and 2010, online advertising will grow during 2010 by 13.0% in US Dollar terms or by 21.1% in Euros.

Paid Search has quickly become the most important component of online advertising, and in 2010 this segment will account for $29.8 billion, up by 16.5% over 2009 totals on a constant currency basis, and about 49% of total revenues. Google is the global leader in paid search, but in the paid search markets of China and Russia, the leading paid search providers are domestic players Baidu and Yandex.

All other online advertising will account for $31.2 billion, up by 8.7% in constant currency terms. Other online advertising is much more diffused, with a handful of global portals, such as Yahoo and Microsoft, and many regionally strong publishers (often associated with print publications) capturing most of that sector's revenue.

Advertising networks retain their importance to advertisers given their ability to aggregate and monetize vast quantities of inventory in an inexpensive manner. Social networking sites such as Facebook capture a large and growing share of audience time.

These trends should continue over the next five years, and the report expects online advertising to collectively grow by 11.7% in 2011 and by an average rate of 11.0% through 2015. At this time the global industry will generate $103 billion dollars in constant dollars.

Latin America is expected to be the fastest growing region, with $3.5 billion of total supplier advertising revenue in 2015 on an average rate of 13.3% growth over the next five years. Among specific countries Thailand will be the fastest growing online advertising market off of a very low 2010 base. Among larger markets, China and Russia will post the fastest sustained rates of growth over the next five years.

The ongoing global economic recovery has contributed some modest uplift to the expectations of growth, but secular factors are the primary cause of this rapid and sustained pace of development. Importantly, says the study, industry growth is not directly caused by increasing numbers of consumers online nor by rising levels of time spent online. Instead, the secular factors identified as driving growth include:

• Rising numbers of businesses, many of them small, others simply highly niche oriented and others who are endemic to the Internet, such as Amazon and eBay, find online media to be the single most effective platform to accomplish their business goals.
• Competitive intensity between advertisers within similar brand-categories, especially those that rely on online advertising, as strategies remain common in directing advertising budget allocations online and offline.
• The increasing presence of large brands that otherwise prioritize television advertising. While these advertisers continue to rely on television for awareness-based objectives, they are emphasizing online activities for deeper engagement. Online budgets from these advertisers generally come at the expense of print and radio.

These factors establish a very deep foundation for online advertising. Brand-centric, television-dominant advertisers are particularly critical for online advertising, supporting much of the format innovation which will reinforce growth in the years ahead.

An innovative area receiving much attention is mobile advertising. While mobile clearly represents a growth opportunity, it will continue to be a modestly sized segment of the digital media eco-system as long as different segments of marketers have alternative media vehicles which better meet their business objectives. However, as m-commerce and mobile marketing become more prevalent, an endemic ecosystem will gradually emerge, followed by growing volumes of advertising revenues.

North American & Global Forecast ($MM, 2009USD constant currency)
	Actual	Estimate
	2009A	2010E	2011	2012	2013	2014	2015	2010-2015 CAGR
North America
PaidSearch	11,213.8	13,054.8	14,723.8	16,235.3	18,010.5	20,004.9	22,274.5	11.3%
Annual Growth / Decline	1.6%	16.4%	12.8%	10.3%	10.9%	11.1%	11.3%
%ofTotal Internet	46.3%	48.0%	48.6%	48.6%	48.7%	49.0%	49.2%
Other Online	12,997.4	14,143.9	15,597.9	17,193.2	18,960.9	20,851.3	22,963.3	10.2%
Annual Growth / Decline	-6.4%	8.8%	10.3%	10.2%	10.3%	10.0%	10.1%
%ofTotal Internet	53.7%	52.0%	51.4%	51.4%	51.3%	51.0%	50.8%
Total Internet	24,211.3	27,198.7	30,321.8	33,428.5	36,971.5	40,856.2	45,237.8	10.7%
Annual Growth / Decline	-2.9%	12.3%	11.5%	10.2%	10.6%	10.5%	10.7%
Global
PaidSearch	25,564.6	29,791.3	33,765.5	37,886.5	42,568.5	47,744.7	53,569.2	12.5%
• Annual Growth / Decline	7.6%	16.5%	13.3%	12.2%	12.4%	12.2%	12.2%
%of Total Internet	47.1%	48.8%	49.6%	50.2%	50.8%	51.4%	52.1%
Other Online	28,698.9	31,202.4	34,348.5	37,620.7	41,174.8	45,056.6	49,334	9.6%
Annual Growth / Decline	-2.0%	8.7%	10.1%	9.5%	9.4%	9.4%	9.5%
%ofTotal Internet	52.9%	51.2%	50.4%	49.8%	49.2%	48.6%	47.9%
Total Internet	54,263.5	60,993.7	68,113.9	75,507.3	83,743.3	92,801.3	102,903.6	11.0%
Annual Growth / Decline	2.3%	12.4%	11.7%	10.9%	10.9%	10.8%	10.9%
Source: MagnaGlobal, June 2010

To access more detailed information contained in the PDF file for this study, please visit MagnaGlobal here.

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