IDC: US Internet ad spending to boom

Online advertising will balloon in the coming years, becoming bigger than all advertising media except direct marketing by 2012, according to IDC.

Spending in U.S. online advertising will double from US$25.5 billion in 2007 to $51.1 billion in 2012, along the way climbing up from the fifth-largest to the second-largest ad medium and dwarfing newspapers, cable and broadcast TV, IDC said Friday.

The growth will come despite the economic turmoil roiling the U.S., as marketers shift advertising dollars to the Internet to take advantage of emerging formats like online video, which will see its ad spending shoot up sevenfold from $500 million in 2007 to $3.8 billion in 2012, a compound annual growth rate of almost 50 percent for that time period.

Factors that will boost online video advertising include an increase in broadband access, faster connections, the availability of more "premium" content and viewers' embrace of the medium's flexibility to pick what they watch and when, according to IDC.

Meanwhile, search advertising will continue as the single largest format for online advertising. Search advertising is currently dominated by Google with about 70 percent of the U.S. spending, IDC said.

Earlier this month, the Interactive Advertising Bureau (IAB) reported that U.S. online ad spending increased 26 percent in 2007 over 2006, and that the Google-dominated search format not only remained the market's largest, but also increased its share of the overall pie.

Search advertising accounted for 41 percent of the $21.2 billion in U.S. online spending last year, up from 40 percent in 2006, the IAB said. In 2007, spending in search advertising grew 30 percent over 2006.

With highly optimistic reports like these about the expected continued growth in online ad spending, the sense of urgency likely grows among companies like Microsoft, AOL and Yahoo, all of which have so far failed to capitalize as much their investors and executives have expected on online advertising's growth in recent years.

The IDG News Service is a Network World affiliate.