Online ad spending will surge to $18.9 billion by 2010--up about 59 percent from an estimated $11.9 billion this year, according to a report released Monday by Jupiter Research. But despite the uptick
in online revenues, Web advertising will account for just 7 percent of all ad spending in 2010--compared to 5.6 percent this year, according to the report, "U.S. Online Advertising Forecast,
2005-2010."
With its latest forecast, Jupiter Research joins other researchers to predict continued strength in online advertising. In May, Forrester Research estimated that ad
spending would climb to $14.7 billion this year and $26 billion by 2010. Research firm eMarketer forecast a total online ad market of $12.9 billion this year, while financial company Goldman Sachs pegged this year's Web ad spend at $12.3 billion.
Expansion is likely to occur at
an even keel in the next five years, Jupiter Research predicted. "This growth will be steady and consistent, rather than filled with spikes or valleys," stated the report, for which Gary Stein served
as lead analyst. "This steady growth reflects the stability of the industry, both in terms of the players involved and their business practices."
Jupiter Research also forecast that in
2010, spending on search will account for $7.5 billion, surpassing that year's estimated $7.1 billion spend on display advertising. Additionally, marketers will spend $4.5 billion on streaming and
rich media, and $4.1 billion on classified advertising in 2010. This year, by contrast, online marketers will spend an estimated $5.1 billion on display advertising, $4.2 billion on search, and $2.6
billion on classifieds.
The researchers propose that one of the reasons for the growth in search advertising will be a recognition that search can be used for branding purposes.
As search advertising gains in popularity, so too will pay-for-performance pricing models, predicted Jupiter Research. While 40 percent of online ads currently are purchased on a cost-per-thousand
impression basis, Jupiter Research predicts that just 28 percent of Web ads will be priced on a CPM basis in 2010. At the same time, by 2010, 54 percent of Internet ads will be purchased on a
cost-per-action basis--up from 43 percent this year.
In the near future, look for marketers to cut back on their use of banner ads, while increasing their use of streaming media, behavioral
targeting, and mobile ads. Sixty-eight percent of 464 advertisers surveyed in February reported that they had used banner ads in the last 12 months, but just 58 percent said they planned to use such
formats this year.
When asked about their use of streaming formats, 13 percent of surveyed advertisers said they had used streaming media in the last year, while 26 percent plan to this
year. Behavioral targeting was employed by just 7 percent of surveyed advertisers in the last year, but almost double that figure--13 percent--plan to incorporate behavioral targeting in their
campaigns this year.
Only 5 percent of marketers sent ads to mobile phones last year, while 9 percent said they expect to this year. But the report also warns that marketers should tread
carefully when it comes to cell phone advertising. Forty-two percent of 2,200 consumers surveyed in May said they don't want mobile ads, according to the report.
Jupiter Research also
reported that consumers between the ages of 25 and 44 spend more time online than watching television. A June survey of more than 4,000 people revealed that consumers between the ages of 25 and 34
spend 14 hours a week online, compared to 10 hours a week watching TV, while consumers ages 35-44 spent 14 hours a week online and 12 hours a week watching television.
Surveyed consumers
also indicated they were responding to Web ads. Almost one in three--31 percent--said they made purchases online as a result of viewing an Internet ad, while 22 percent said that online ads spurred
offline purchases.