• by Joe Mandese , October 2, 2006

The Internet, which is poised to overtake outdoor as the fifth largest ad medium this year, is closing in on radio's fourth place ad market ranking, reports ZenithOptimedia in the latest quarterly revision of its ongoing global ad tracking study. The revision, released this morning, estimates that Internet ad spending will break the double-digit market share in at least two countries - the U.K. (12.9 percent) and Sweden (10.5 percent) - marking the first time online ad spending has held such a significant ad market share in any major market in the world. Other markets projected to break the double-digit online ad share barrier by 2008 include: Australia, Israel, Japan, Norway, South Korea and Taiwan.

But despite ZenithOptimedia's projection of an 84 percent expansion in Internet ad spending between 2005 and 2008 (up from only a 76 percent rate of growth predicted in the agency's last forecast), the Publicis media agency doesn't expect it to break the double-digit barrier globally until 2011.

"The internet's share of global ad expenditure was 4.7 percent in 2005. We predict it will be 5.7 percent in 2006 and 7.3 percent in 2008," predicts the report. "At this rate the internet's ad share should reach double-digits worldwide by 2011."

The agency says much of the growth is coming from an acceleration in demand from smaller advertisers who are "embracing the affordability and targeting capabilities" of online advertising.

"Advertisers in the top ten categories have been cautious about moving into Internet advertising," ZenithOptimedia writes, noting that between 2001 and 2005 the proportion of their budgets allocated to the Internet increased from 2.2 percent to 3.2 percent. Over the same period the Internet's share of total ad expenditure rose from 2.5 percent to 4.7 percent.

"This of course means that advertisers from smaller categories have been spending more than average on internet advertising, which is relatively cheap and can be targeted very effectively," the agency notes. "This makes it suitable for smaller advertisers, for some of which mass-media campaigns would be too expensive and have too much wastage. The Internet therefore encourages these advertisers to spend more than they would otherwise have done, and is not just cannibalizing ad expenditure that would have gone elsewhere."

In terms of overall media, the agency now expects global ad spending will grow 6.0 percent this year, 5.4 percent next year and 5.9 percent in 2008. The U.S. is poised to expand at even more moderate rates: 5.2 percent this year; 4.2 percent in 2007; and 4.3 percent in 2008.