Internet Advertising Regaining Momentum

After suffering setbacks due to the recession, Internet advertising appears to be recovering well ahead of predictions. While advertising in traditional media like newspapers and magazines continues to founder, resulting in layoffs and pay cuts, advertising online seems to be gathering steam again. Kent State professor and former media analyst Lauren Rich Fine recently said that advertising in traditional media, classified sections in newspapers in particular, will never recover to pre-recession levels.

This forecast is in sharp contrast to the growing number of advertisers steadily increasing their online advertising budgets where more of their target audience spends their free time. Further worsening conditions for older media outlets, advertising online is less expensive, and an online advertiser’s return on investment is much easier to measure and track. Even companies that have longstanding advertising relationships with television networks and publishers are realizing that they need a strong marketing presence on the Internet, too.

“You can draw a straight line from the time when people hear an ad on the radio or television to when they search for that company on the Internet,” said David Karnstedt, chief executive of Efficient Frontier, which helps manage ad campaigns on search engines.

PricewaterhouseCoopers and Wilkofsky Gruen Associates expect these online advertising trends to continue to grow and provide Internet advertisers around 19 percent, or almost $87 billion of the world’s ad market in 2013. This would represent a huge jump from 4 percent and around $18 billion as recently as 2004. If these projections come to pass, the Internet would become the third-largest marketing medium in the world. Television is expected to continue to dominate with $168 billion, or 36 percent of the world’s ad market in 2013, a one percent increase from 35 percent in 2004. Newspapers are expected to hold onto their number two spot by 2013, but their projected $92 billion in revenue and 20 percent market share will be down sharply from their 28 percent share in 2004.

Online marketing firm Emarketer expects online advertising sales to fall 3 percent this fall, but projects that Internet sales will increase 6 percent in 2010 and another 7 percent in 2011. The evidence of an online advertising recovery is being made by Google, whose online advertising has grown substantially over the last several years from $411 million in global ad revenue in 2002 to well over $22 billion a year now. Google’s advertising revenue grew 7 percent in the third quarter of this year. The company stated that it is preparing for even more rapid growth in the coming months.

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