Search Predicted As Online Ad Growth Driver

Neil-DoshiCitigroup estimates online advertising will grow 21% this year, up from 15% in 2010, according to Neil Doshi, senior equity analyst at Citigroup, who opened the Search Insider Summit in Deer Valley, Park City, Utah on Thursday. Search advertising will drive the growth.

Doshi estimates online advertising will grow 17% in 2012 and 14% in 2013. Search will grow more rapidly than online advertising, taking share during the next few years, he said. Growth in display will follow behind search advertising and come from social and digital video ads.

As the world becomes smaller, and global economies grow, companies will begin to see a high degree of correlation across the world. During the past few years, there has been a correlation between U.S. and Europe economies, where one impacts another -- making it more important for marketers to follow as the world turns, especially when it comes to mobile search advertising.



Mobile will help drive search marketing, and TV budgets will continue to move online. Doshi said if more TV advertising comes online, the 14% and 17% growth estimates for the next two years will become conservative, and the industry could see about 20% growth.

In 2001, online advertising took the brunt of the bubble. In the last recession, traditional advertising took the hit -- declining in the double digits -- while online advertising dipped about 3%, but recovered quickly. Search, display and lead generation drove the growth during the past few years. These buckets will continue to drive growth.

Consumers are spending more online per transaction, according to Kenshoo. Consumers are more trusting of paid-search ads, and retailers have become more savvy at designing and managing campaigns. Overall search advertising click-through rates for the holiday season to date rose 11% compared from the prior year.

While Google benefited from the last ad recover, Doshi believes Facebook could potentially benefit from the next. Facebook changed the way people interact with the Web. The social site constitutes 16% total Web minutes online, followed by Google and Yahoo.

People now view social networks as a utility, he said. "Facebook now constitutes about a quarter of total display ad impressions in four out of five large companies, such as the U.S., U.K., Canada and Germany. It's about close to 25%-28%."

Social networks now constitute about one-third of total ad display impressions, according to comScore. And 43 of the top 100 display advertisers now publish about 20% of their display ad impressions through various social networks, Doshi said.

When Citigroup polled marketing executives, the majority said they plan to increase budgets on social networks. Sixty-five percent said they will spend more in social media, 50% in Web site upgrades, 53% in content creation, 51% in landing page optimization, 49% in search engine marketing for both SEO and paid search, 42% in online advertising, 42% in email, and 15% in direct mail.

"Facebook now constitutes more ad impressions than Yahoo, Microsoft and AOL combined," Doshi said. "This will lead to CPM deflation. We started to see a financial impact on a number of public Internet companies. Yahoo in the first three-quarters of 2010 display grew ad revenue in the mid-to-high teens, and after 2011, we saw a significant drop-off in their display advertising. We think a lot of this is due to Facebook and lower CPMs at Facebook and the ability to target specific audiences more closely."

Doshi points to mobile, TV coming online, Facebook, cloud services, local ad markets, and digital goods for long-term online advertising growth.

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