Monday, August 27, 2007

Prediction: 'Watershed Moment' For Online Advertising in 2011

Prediction: 'Watershed Moment' For Online Advertising in 2011
By Jason Fell

A recent report indicates that online advertising will continue to grow at a rapid pace over the next five years, and predicts that it will reach nearly $62 billion in 2011, replacing newspapers as the largest ad medium.

The report, private equity firm Veronis Suhler Stevenson's Communications Industry Forecast 2007-2011, shows that advertisers have noticed the consumer shift to online content and have been putting considerably more money into digital marketing, including pure-play Web sites and digital extensions of traditional media. Online advertising is expected to grow by more than 20 percent per year. The report describes the change as a "watershed moment in communications history."

Total consumer magazine spending-including print and digital platforms-increased only 1.9 percent in 2006 to $23.96 billion, the report says. Advertising expenditures rose only 3.3 percent last year to $13.15 billion. Total spending on b-to-b media-including print publications, trade shows and e-media-increased 5 percent in 2006 to $23.58 billion. Advertising expenditures increased .9 percent last year to $9.05 billion. That's a sharp decline from 6.4 percent growth rate in 2005 due, mainly, to a strong shift in marketing budgets online, the report says.

"We are in the midst of a major shift in the media landscape that is being fueled by changes in technology, end-user behaviors and the response by brand marketers and communications companies," VSS executive vice president and managing director James Rutherford said. "We expect these shifts to continue over the next five years, as time and place shifting accelerate while consumers and businesses utilize more digital media alternatives, strengthening the new media pull model at the expense of the traditional media push model."

Meanwhile, the continued migration of magazine/newspaper consumers to online products represents a threat to traditional news organizations, according to a recent study by researchers at Harvard University's Joan Shorenstein Center on the Press, Politics and Public Policy. The study, "Creative Destruction: An Exploratory Look at News on the Internet," examines traffic at 160 news-based Web sites between April 2006 and April 2007.

While Web sites connected to traditional news organizations are growing, sites of the major non-traditional news disseminators-including aggregators, bloggers and search engines and service providers-are growing at a faster pace, the study says. For instance, news aggregator site saw its unique monthly visitor total jump from less than 2 million to more than 15 million, the report says. and grew from less than 50,000 visitors a month to more than 700,000

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