eCommerce

Internet Advertising

The majority of online news users in the US are accepting of online advertising, but most also claim to ignore it, according to data from the Pew Research Center's Project for Excellence in Journalism and its Internet and American Life Project.

The research, conducted during December 2009 and January 2010, found 81% of online news users "do not mind" online advertising. However, 77% of respondents also said they tend to ignore those ads, with 42% claiming they "never" click on them, and 35% claiming to do so "hardly ever."

The research also found 21% of overall users click on ads "sometimes" or "often," with 80% clicking "never" or "hardly ever".

However, a report issued by comScore last week suggested ads don't necessarily need to be clicked on to be effective. Citing the results of studies conducted in 2008 that found US users were 49% more likely to visit an advertiser's site having previously been exposed to a display ad. In addition, it found they were 40% more likely to conduct a search query on an advertiser trademark after seeing an ad, regardless of whether or not they clicked on it. (ClickZ Stats, March 2010)

Online advertising revenues will increase slightly in 2009 only to drop in 2010 before recovering, predicts the Yankee Group in its "2009 Advertising Forecast: Getting the Consumer's Attention". The research firm estimates 2009 online ad revenues at $23.63 billion, a 1.8% year-over-year increase. In 2013 revenues will surpass $31 billion. Yankee Group attributes the up-down forecast for the next two years to the combination of increasing user attention, booming search advertising and falling ad prices due to inventory oversupply.

eMarketer is more bullish in its US online ad spending projections for the forecast period, predicting increases every year through 2013, when ad spending will hit $37.2 billion. eMarketer believes that $24.5 billion will be spent on online advertising in 2009.

US mobile advertising revenues will see faster growth, according to Yankee Group, which predicts a 60% jump this year to $184 million. By 2013 the research firm expects $566 million to go toward mobile ads. eMarketer's US mobile ad spending forecast is significantly higher, predicting $760 million in spending this year, rising to more than $3.3 billion in 2013. However, different research firms have widely varying estimates of mobile ad spending, unsurprising in a nascent market that is still difficult to measure. Figures for 2009 spending range from Yankee Group's low of $184 million to the more than $2.2 billion in spending predicted by JPMorgan in January 2009. (eMarketer, September 2009)

Nearly all media sectors will experience advertising spending declines in the US in 2009, according to the "Media Advertising Forecast" from MAGNA. Hardest hit will be traditional media such as newspapers, radio, magazines and TV, each falling by 14% or more. Even the once-indomitable online ad space is faltering, with MAGNA expecting a 2.2% total spending decrease.

eMarketer projects digital ad spending will grow by 4.5% in 2009, while PricewaterhouseCoopers and Credit Suisse predicted a 4% decline and flat growth, respectively. MAGNA estimates that direct online media, which includes search, lead generation and internet yellow pages, will see a 2.9% increase.

National online ads, which encompass display, classifieds, mobile, e-mail and online video, will fall by 15%. Most of the drop will come from a weakening display ad market.

However, mobile and online video are going the other direction. MAGNA projections show mobile advertising revenues growing 36% to $229 million in 2009 and to $409 million in 2011. Online video ad spending will increase 32% to $699 million in 2009, and over $1 billion in 2011. (eMarketer, July 2009)

Over half of adults in a 2008 TNS Global and TRUSTe poll were concerned about advertisers using their browsing history to serve relevant ads. 45% of internet users in a 2008 Harris Interactive study were uncomfortable with Websites that allow behavioural targeting. Despite that, Q Interactive, a provider of digital targeting services, found that 53% of Web users would view an advertiser favourably if ads were tailored to their interests. Only 5.6% of them said they would view the advertisers unfavourably.

In fact, with the exception of 18-to-24-year-olds, over 50% of respondents of all ages said they would view an advertiser favourably if they received personalised ads. Although there are still obstacles to getting personal information, 53% of internet users would rather have free online services and insider information in exchange for relevant targeting data.

On the other hand, 32% of the respondents said they would accept worse service in exchange for privacy, and 15% would prefer to pay for premium service and view no advertising whatsoever. In addition, users were not comfortable sharing all types of personal information. They were most at ease sharing their ZIP code, gender, age and marital status. Users were less inclined to give information such as income and phone and Social Security numbers. (eMarketer, June 2009)

The online share of ad dollars will continue to grow, rising from nearly 10% in 2009 to slightly more than 15% in 2013, according to eMarketer.

US online advertising spending as a % of total media advertising spending, 2007-2013:
- 2007: 7.6%
- 2008: 8.7%
- 2009: 9.9%
- 2010: 11.2%
- 2011: 12.3%
- 2012: 13.8%
- 2013: 15.2%

The spending shifts predate the recession, according to eMarketer. But the current economy is reinforcing the new advertising models and making them more permanent. (eMarketer, April 2009)