Online Ads Hit $50 Billion By 2011; Local Reaches $9 Billion By 2012; Pre-Roll, Embeds Gain In '08
With all the doom and gloom hovering over the economy right now, analyst reports heralding brighter days for the future of internet ad spend continue to be released.
Context & Ripple Effects
The long-range forecasting season for online ads continues: after December's report projecting internet spend would overtake radio this year and magazines by 2010 (online set to overtake radio and magazines), Jupiter now puts total online advertising at $50 billion by 2011, with local reaching roughly $9 billion by 2012. The baseline makes the growth case concrete — 2006 closed out at just under $17 billion for the full year (2006's $17 billion tally), so the forecasts imply a tripling over five years.
What makes today's release notable is its timing: it lands the same day a working web ad buyer argued online is less robust than the numbers suggest and that CPMs are headed down (the ad buyer's bearish read on CPMs). Analyst projections and buyer-side sentiment are pointing in opposite directions, and the pickup by Search Engine Land shows the local-online figure in particular is getting wide circulation.
First-order effects
- Video publishers and content sites get an explicit demand signal for 2008: pre-roll and embedded formats are forecast to gain traction, which supports building out video ad inventory ahead of that curve.
- Local advertisers and their agencies get a quantified target market — roughly $9 billion by 2012 — giving local online budgets a benchmark they previously lacked against traditional local media.
Second-order effects
- Traditional local media — the radio and magazine categories already projected to be overtaken — face a second squeeze as analysts carve out local online as its own fast-growing pool competing for the same advertiser dollars.
- The same-day divergence between Jupiter's growth forecast and the ad buyer's falling-CPM view pressures media agencies to plan on two clocks: committing to long-term digital shifts while negotiating softer near-term display rates.
Third-order effects
- If the pattern of analyst forecasts outrunning buyer sentiment holds into a downturn, the industry's investment decisions will increasingly hinge on which signal wins — long-run structural share gains versus short-term pricing power.
- Local becoming a named multi-billion-dollar category points toward consolidation of local ad sales around scalable platforms rather than rep-by-rep traditional media selling, reshaping who owns the advertiser relationship at the local level.
The trend: Analysts are projecting sustained online ad share gains — overall, local, and video-format specific — even as buyer-side voices warn that near-term pricing is softening, making 2008 the test year for which signal governs spending.