Digital to Rely on Retail, Telecom and Tech Sectors for New Growth

The online advertising industry, which extends only back to 1996, passed the $30 billion mark in 2011. Despite the slow economic recovery, interest in online advertising continues to grow. A new report from Pricewaterhousecoopers (PWC) and the Interactive Advertising Bureau shows us what to expect for the future of online advertising and is based on an analysis of past trends.

Online advertising trends include a tendency to bring in slightly more revenue in the second half, 53%, than in the first half, 47%. This trend is linked to retailers who want to advertise during the traditional holiday season. In addition, the business of selling online advertising remains highly concentrated. The top 10 companies controlled 71% of the revenue in the last quarter of 2011. And the top 50 firms have managed to grab up 90% of the spending. That leaves about $3 billion in ad money for smaller media providers to snag.

Online ad spending broke out by category as follows for 2011:

  • Search $14.8 billion (46.5%)
  • Display $11.1 billion (34.8%)
  • Classifieds $2.6 billion (21.5%)
  • Mobile revenue $1.6 billion (5%)
  • Lead generation $1.5 billion (4.8%)
  • Email $213 million (0.7%)

Banner ads remain the top revenue generator in the display category with $6.8 billion and 21.5% of the segment. The other formats in the segment include rich media with $1.5 billion ( 4.1%), digital video $1.8 billion (5.7%), and sponsorship $1.1 billion (3.5%).

The two categories that marketers have been showing less interest in are classifieds and lead generation.  And while media providers earned slightly more from the email campaigns they generated for clients, the format stayed steady as a percentage of the total online advertising ecosystem. For most marketers, search and display still rule. However, mobile was also a clear winner in terms of absolute and relative growth last year and is likely to have the same position in 2012.

Most analysts expect online ad spending to reach $39.5 billion this year which would put it past the ad revenue that print newspapers and magazine will record.

Retailers remain the top spenders for online advertising accounting for 22% of activity while the telecom industry fuels another 12% of industry advertising. This is slightly different than the general ad market where retailers account for only 12% and telecom for 8%. The computer/​software category, not surprisingly, is another sector that relies heavily on online where it makes up 8% of total revenue. In the general ad market, the tech sector only accounts for 1.3% of revenue.

[Sources: IAB Internet Advertising revenue Report. IAB​.net. April 2012. Web. 1 May 2012; US Online Advertising Spending to Surpass Print in 2012. Emarketer​.com. 19 Jan. 2012. Web. 54 May 2012, Domestic Ad Spending by Category. Adage​.com. Web. 1 May 2012] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.