U.S. online ads spending will reach $25.1 billion this year, with search being the single biggest category and social media marketing taking over from display media, according to eMarketer's latest report.
eMarketer's study expects the Internet to account for 15.1% of total media spending in 2010 and over 20% by 2014. The firm sees search accounting for $12.4 billion, or nearly half, of overall advertising budgets this year.
With social content players like Twitter gradually entering the paid search market, the spending shift could even be more important than expected. "The anxiety attached to the still-healing economy encourages marketers to bet more on 'sure things'--and the ability to measure Internet ads, especially search, makes them more sure than most traditional ad spending," said David Hallerman, eMarketer senior analyst and author of the new report "US Ad Spending: How Big Is the Bounceback?"
The Rat Race
Remember, a recent report from comScore showed that Yahoo and Microsoft's shares of the U.S. search market grew fastest in May, partly due to the boost of contextualized search through the companies' Search Alliance. Google however, remains the undisputed leader with 63.7% of market share in May according to comScore. Experian Hitwise did not release its May figures but had Google's lion share at 71% in April.
The search giant has already pocketed some $4 out of every $10 spent in U.S. online advertising in the first quarter and eMarketer sees it posting a 20% ad revenue increase this year. Google has been quite aggressive in its recent approach to marketers, releasing a slew of new features and products for them. Among those, AdWords' Analyze Competition tool that tells advertisers about their competitors' performance and the super-customizable Google Commerce Search 2.0.
eMarketer sees Microsoft as the other riser, posting a 14.4% increase this year while Yahoo is expected to lose 2.2% of ad revenues and AOL to slide by 10.2%.
AOL, who is trying to reposition itself on the content market, only attracted 3.9% of spending in the first quarter. However, eMarketer suggests that the portal could, for that reason, be a good bet for marketers as it also sustains strong traffic at almost 11% of U.S. portal front-page visit in April 2010 (Experian Hitwise) while offering ad-pricing leverage due to weaker ad revenues.
Altogether, Yahoo, AOL, Microsoft and Google are set to garner nearly 60% of web spending in 2010.
Part of the reason why marketers are shifting to online spending, is that they are seeking to launch better-targeted, higher-ROI ad campaigns. They therefore prefer to allocate their dollars to more non-advertising marketing. As they look to "engage their audience with relevant, trustworthy messages," said Mr. Hallerman, marketers tend to invest in their websites or brand microsites to better benefit from the online ecosystem. They also place their bets on the fast-paced social web (Facebook, Twitter, blogs...). Budgets for display ads now are engulfed into social media display. In the first quarter, Facebook sold 176.3 billion display ads impressions, representing 16.2% of the U.S. total. Yahoo came in second, selling 131.5 billion impressions (12.1%) and Microsoft 60.2 billion (5.5%). AOL just bowed out of the game by selling its social platform Bebo to Criterion Capital Partners.
Although spending on banner ads is seen to account for 22% of online ad budgets in 2010, it will remain steady at $5.5 billion from last year. eMarketers also forecasts rich media, lead generation, classifieds and sponsorships to stay unchanged or slightly decline.
As far as online video advertising is concerned, it is expected to post the biggest increase in 2010, growing from $1 billion to $1.5 billion. That segment will probably pursue steady, if not exponential, growth as the market for online video continues to expand. According to Cisco's Virtual Networking Index (VNI), online video really is the next big thing.
Well positioned to benefit from the trend is Facebook, who, without setting out to be a video destination is becoming a major video ad display outlet. The social site's strength apparently stems from virtual game currencies.
eMarketer's forecast is based on data from 14 research firms, of which ZenithOptimedia, Magna, JPMorgan and IDC are predicting double-digit growth for the online ad market in 2010. eMarketer has revised upwards its expectations to $25.1 billion from a previously anticipated $23.6 billion, or a 10.8% increase from last year. The eight other forecasters' figures were for a 2 to 9% uptick.