Online ad spending continued to surge in the second quarter, according to a new study conducted by Deutsche Bank in conjunction with MediaPost. The strong growth appears to be the result of a
combination of growth in marketers entering online advertising with a scarcity of premium inventory.
The report, released today, shows that marketers spent more on Web advertising in the
second quarter of this year than the first three months--when they spent more than in the last quarter of 2004.
For the report, 116 media executives were questioned in June about their clients'
experiences with Internet advertising in the second quarter, and expectations for the second quarter. This survey, which was conducted online by InsightExpress using members of the MediaPost advisory
panel, is the third in an ongoing series of quarterly studies of media professionals by MediaPost and Deutsche Bank.
Overall, two out of three--66 percent--of executives surveyed said that their
clients' spending increased from the first quarter, while an additional 26 percent reported that budgets were flat. Almost half of all survey respondents (48 percent) said that marketers upped their
spending by at least 11 percent--including 12 percent who reported increases of more than 30 percent.
What's more, respondents also predicted a further rise next quarter. Seventy percent of
executives surveyed forecast that spending will increase in the third quarter, with 38 percent predicting an increase of more than 10 percent. On average, respondents forecast a 10 percent
third-quarter increase, according to Deutsche's weighted calculations.
The strong second-quarter results stem from both higher prices and an influx of marketers to the Web, said Jeetil Patel, a
senior analyst at Deutsche Bank. "Marketers are still ramping up on the number of campaigns they're running online, which is helping to grow the marketplace," he said.
Deutsche Bank noted
increased spending by the car industry as well as pharmaceutical marketers--both of which, stated the report, are "late-comers to the online advertising party."
Deutsche Bank calculated that
respondents reported a total quarter-over-quarter ad spend increase of 11 percent, based on the weighted dollar amount of spending managed by each respondent. That rise comes on top of a reported 11
percent sequential increase in the first quarter. But the overall online media spend might differ from the 11 percent figure, because display advertising figured heavily in the survey respondents' ad
spend. Most of the respondents' ad budgets--58 percent--went to display advertising, while just 16 percent of the budgets were allocated to search in the second quarter.
As in prior surveys,
executives indicated that publishers still can command high prices for premium inventory. Seventy-nine percent of respondents reported that impressions on home pages, vertical channels, and rich media
cost more in the second three months of this year than the first three.
Almost half of the respondents--48 percent--said that prices for premium inventory rose between 1 and 10 percent; 18
percent of respondents reported an increase of between 11 and 20 percent; 10 percent of executives said that prices went up between 21 and 30 percent; and 2 percent of respondents reported a spike of
greater than 30 percent.
Most respondents--55 percent--also saw prices rise for run-of-network inventory, although increases were lower than for premium inventory. Despite the run-of-network
price hikes, Deutsche estimates that as much as half of available inventory on larger networks such as Yahoo! remains unsold, or goes for as little as $1 to $3 per thousand impressions.
More than
one in three media buyers--35 percent--reported run-of-network increases in the 1 to 10 percent range, while 13 percent reported spikes of 11 to 20 percent, and 6 percent of respondents saw
run-of-network increases in the 21 to 30 percent range. Almost three in four--37 percent--reported that run-of-network pricing was flat.
Overall, Deutsche Bank concluded that the cost of premium
inventory rose by about 9 percent in the second quarter--compared to 7 percent in the first quarter. (Deutsche also noted that, in general, the second quarter tends to be a better season than the
beginning of the year.) Overall, run-of-network climbed by about 5 percent quarter-over-quarter, compared to a 4 percent increase in the first three months of this year.
Twenty-seven percent of
branding dollars went to the largest portals--compared to 21 percent last quarter. Yahoo! captured 14 percent--more than MSN (6 percent) and AOL (6 percent) combined, and more than the 11 percent that
Yahoo! garnered last quarter. "It appears that Yahoo! is still picking up some steam," states the report.
The largest proportion of branding dollars--37 percent--went to niche sites such as
iVillage and Marketwatch. Eleven percent went to networks such as Advertising.com, ValueClick, and aQuantive's DrivePM. Twenty-five percent went to a variety of other sites, including Web sites of
local media.
The vast majority of respondents--65 percent--also reported that the cost of paid search was up. Forty percent of executives said cost-per-click had increased between 1 and 10
percent, while 20 percent reported a price increase of 11 to 20 percent; 13 percent of respondents said paid search was now at least 21 percent more expensive than in the last quarter of 2004.
Google and Yahoo! captured the bulk of search dollars, with Google accounting for 47 percent of search budgets and Yahoo! accounting for 26 percent; both of those figures were down from last quarter,
when Google captured 53 percent of search budgets, and Yahoo! was responsible for 28 percent.
An additional 5 percent of search dollars went to FindWhat and 3 percent went to MSN--which, although
it hasn't launched wide-scale sponsored listings, offers advertisers limited opportunities to appear as paid links on search results pages.