Report: Driven By Video, Display Ad Spending To Close Gap On Search Within Two Years

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The unrivaled rise of paid search could end as soon as 2014, according to revised forecasts from eMarketer. By then, according to the research firm, growth in spending on online display ads will outstrip that for paid search, although search will continue to take a greater share of dollars.

This year, both search and display are on track to outpace overall U.S. online ad spending, estimated by eMarketer at 13.9%.

Between 2011 and 2014, however, eMarketer projects that online display spending will grow faster than overall online spending, while search spending will lag slightly behind.

The increase in display advertising will be driven partly by the dramatic rise predicted in online video advertising, set to grow by at least 34% every year through 2014. Banner ads will experience more moderate gains of between 7% and 16.2% annually, while rich media spending will stagnate.

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"The growth of display doesn't necessarily mean that advertisers are spending less on search," said David Hallerman, eMarketer principal analyst. "Much of the display ad spending gains are new dollars coming online -- which is part of a bigger trend towards more spending on branding, rather than spending focused on direct response alone."

In 2010, eMarketer estimates U.S. advertisers will spend $12.37 billion on paid search, compared with $8.88 billion on online display ads. Search will still get the most dollars in 2014, at $18.84 billion, but display will have closed the gap somewhat and will reach $15.92 billion in spending that year.

Display ads like static banners have a bad reputation for low click-through rates, according to eMarketer, but still serve an important branding purpose.

"Banner ads today mainly have subliminal effects on the audience," said Hallerman. "That makes banners difficult to measure directly. However, the uptick in search results due to banners from the same advertiser is a long-standing pattern seen by sophisticated digital marketers."

eMarketer predicts branding-oriented online advertising will increase its share of the U.S. total from 36.3% this year to 41.4% by 2014, with direct response making up a commensurately smaller part of the pie.

Display's high growth rates, and especially the dramatic growth expected in online video advertising, will be the main factor behind this trend.

Continued economic uncertainty will inspire advertisers to rely more heavily on digital channels, according to revised spending forecasts released earlier this week by eMarketer. Next year, U.S. online ad spending will increase 10.5% -- followed by double-digit growth every year through 2014, when spending will reach $40.5 billion, eMarketer predicts.

In particular, online video advertising will remain the fastest-growing format throughout the period -- while search will continue to get the most dollars, according to Marketer, which forms its forecast by performing a meta-analysis of research estimates and methodologies from various tracking firms.

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