Could Paid Search Save Online Advertising?

• by Laurie Sullivan , Staff Writer @lauriesullivan, August 19, 2010

PricewaterhouseCoopers (PwC) calls paid search the force attracting budgets to the Internet. In a report released earlier this week, the firm estimates paid search ads rose 10.1% in 2009, canceling out, for the most part, the recession's influence on the industry.

For those supporting paid search campaigns the news gets better. Paid search ads will account for a majority of global wired Internet advertising, rising at a 12.2% compound annual rate (CAGR) to $50 billion in 2014, according PwC's report.

PwC's global entertainment and media team released a report earlier this week that looks at 13 industry segments. The 11th edition of the Global entertainment and media outlook: 2010-2014 focuses on the change in consumer behavior as companies search for a way to reach them online.

The lengthy report also delves into mobile, display and classified ads. Total global wired Internet advertising will reach $96.2 billion in 2014, growing at a 10.5% CAGR. Mobile advertising will rise to $7.7 billion in 2014, growing at a 27.7% CAGR. And, Internet advertising will join television in 2014 as the only medium to support spending in excess of $100 billion.

Although gaining share from print, online classified advertising was not immune to the effects of the recession. During the next five years, display, classified, and other advertising will advance at a CAGR of 8.9% to $46.2 billion in 2014.

Overall, global advertising last year fell by 11.8% in 2009, matching PwC's projected 12% decline. Consumer/end-user spending fell 0.5%, a more modest decline than the 1.2% downturn originally projected for last year. The firm expected companies would continue to invest in online advertising, and they did, despite the downturn.

PwC, however, underestimated the strength of that market. Spending rose 8.2% in 2009, outpacing the projected 5.4% increase. The global E&M market declined by 3% in 2009, a slightly smaller decline compared with the 3.9% originally projected.

In some respects the report reads like an old familiar book we've repeatedly read during the past year. So, it comes as no surprise that advertisers and marketers continue to direct more of their budgets into digital advertising. In 2009, digital accounted for 24% of spending, up from 21% in 2008. The report estimates digital spending rose 10.2% despite the recession in 2009, while non-digital spending fell by 6.4%.

In last year's report, PwC projected the global digital ad market would contribute 31% to the total amount spent in 2013. Now the firm expects that share to reach 32% in 2013, rising to 33% by 2014. Digital advertising accounts for everything from rich media ads to video to search to what we now consider traditional display. And while digital advertising continues to rise in well-developed areas of the world, marketers such as India where broadband remains less widely available and expensive still sees growth in spending on newspapers.

The report brings to light many interesting insights. Some we already know but each provides a good reminder. For starters: Reading books or newspapers has historically been something people do alone. Put that content online and a community of like-minded individuals called "friends" comment on Facebook status update pages, or blog posts. They also retweet Twitter tweets. I believe Web-enabled TV platforms will bring some of the collaboration tools we have come to know and expect from the Web onto the television set.