Online Ad Market Expected To Beat TV By 2012

Video advertising will lead the shift, leading to overall Internet ad revenue of $51.1 billion, according to one research firm.
Internet advertising in the United States will grow eight times faster than the overall market, surpassing newspapers, cable TV, and broadcast TV by 2012, a market research firm predicted Friday.

In four years, online advertising will rise from the fifth-largest medium to the second behind direct marketing, IDC said. Overall revenue from Internet ads will double to $51.1 billion in 2012 from $25.5 billion last year, the beginning of IDC's forecast period.

Video advertising will lead the shift, attracting the most new marketing dollars, the research firm said. Revenue from video will grow sevenfold to $3.8 billion from $500 million. Brand advertisers are expected to shift significant amounts of money into online video commercials from broadcast television and to a lesser extent from cable TV.

People are expected to spend more time watching online video as broadband access penetration increases, connections become faster, and more premium content becomes available.

"What will also drive this trend is that consumers are starting to realize that, as opposed to TV, Internet video lets them watch what they want, when they want, and increasingly also where they want," Karsten Weide, program director for IDC's digital media and entertainment unit, said in a statement.

Search advertising will continue to garner the most revenue over the forecast period in the United States, IDC said. This means that for any media company, search must remain a key part of its strategy for attracting ad dollars, despite Google's current dominance of the market, the analyst firm said. Google has about a 70% share of the search advertising market.

IDC is not the only analyst firm predicting significant growth in online advertising revenue. The Yankee Group expects the market to reach $50.3 billion by 2011, double the amount of 2007. The firm pegged the expected growth to the increasing size of the audience, the development of new types of advertising, and the creation of new publisher business models that will help sell interactive ads.

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