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Long term future still bright for online advertising March 8, 2009

Posted by jeremyliew in advertising, Internet, recession.

James Mitchell, lead internet analyst for Goldman Sachs, presented to a group of around 100 internet and mobile media company CEOs that Lightspeed pulled together last week.

There is clearly near term gloom. Goldman is projecting internet advertising revenue to be flat in 2009 in the US, and to see just 4% growth world wide. However, Mitchell showed that there is still plenty of long term headroom for growth in the internet advertising market. He pointed out that in the US, internet advertising represents around 8% of all advertising today, and this could as much as double over time:

Experience overseas leads us to believe that as Internet penetration, broadband penetration, smartphones and mobile access, and general comfort with the Internet grow, so too will online advertising as a percentage of total advertising.

For example: Online advertising is 17% of total advertising in Korea, with search comprising 11% and display & other making up 6%. Korea reached 50% broadband penetration in 2001, when search advertising that year was about 2% of the total ad market. The US took until 2005 to reach those levels.

Similarly, in the UK, online advertising is 13% of total advertising. In the US, online was only about 8% of the total at the end of 2008. We believe that the US and UK will catch up with Korea, and that the rest of the world will gradually converge with developed Internet economies.

Further, we believe that the transition to online will occur more quickly in developing markets such as China, as advertisers “leapfrog” traditional forms of advertising and begin advertising solely or primarily online.

Search and Display internet advertising as % of total: US vs Korea

Search and Display internet advertising as % of total: US vs Korea

He speculated that online advertising share of all advertising could reach as high as 23% if a scalable advertising solution for social media could be found.

Clearly, the companies that make it through to the other side of this advertising recession will have plenty of growth left ahead of them.


1. cem sertoglu - March 9, 2009

One requirement for the leapfrog effect in emerging markets will be transparency in the advertising sector, there. Unfortunately, advertising, and media planning and sales are far from that in some markets. They are mired with unhealthy biases, deep relationships, thinly veiled kickbacks, and, in general, unfortunate inefficiencies that go against the measurable, transparent nature of online advertising. My hope is that the measurability will prevail.

2. Mukul - March 9, 2009

This is true even for India. 40-50% of Internet advertising in India directly goes to Search and specifically to Google. When we woke up for the internet advertising, google was already a phenomenon so everybody preferred search than Banner


3. Douglas Galbi - March 10, 2009

Advertising expenditure history offers additional grounds for optimism. Yellow Pages directory advertising is an early form of purchase-intent-related advertising. In the Great Depression, U.S. directory advertising dropped 22%, compared to 44% for all forms of advertising. Directory advertising also showed strong growth relative to other forms of advertising from the early 1920s to the early 1990s. So intent-related advertising was more resilient to a major economic downturn, and showed relatively strong historical growth.

For the relevant data, see

4. Trail Mix and Online Advertising | Marketing.fm - March 10, 2009

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5. Trail Mix and Online Advertising » Eninvent - March 10, 2009

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6. Simon - March 11, 2009

Not entirely on topic but I found my own response to this interesting. Goldman used to be a gold plated brand. I would have read this with interest, probably quoted it, but the drama’s of the past 6 months have impacted the way we perceive these brands. They used to be the source of truth but now we can’t be sure if we’re being educated or sold. Does anyone else feel the same way?

7. Internet Marketing Company - March 15, 2009

At Endai Worldwide, an internet marketing company, we believe that the future of online advertising revolves around the key components: search, email and analytics. I realize that email is not truly online advertising. However, it has consistently produced extremely low CPAs.


[…] Long constituent forthcoming ease gleaming for online advertising « Lightspeed … […]

9. iGuide - March 27, 2009

I’m glad someone agrees with me that online ad spending will increase, eventually. 2009 is a very bad year for online advertising, but I see no reason why the trend should continue. The best eyeballs are online, and so that’s where the money should be.

10. Online Advertising - April 3, 2009

While there may be some doom and gloom at the moment with online advertising budgets there is still going to be massive growth in the area in the coming years.

Online Digital Trackable Advertising is a major trend in the market place and at 8% saturation means it is approaching the strong growth in the S-Curve. It is predicted that it takes 50% of the time to reach 10% and the other 50% of the time to reach 90%. So far, roughly 10 years have passed with online advertising and that means that by 2020 we should be at or close to 90% of all advertising budgets using some or all online advertising for marketing.

There are many smaller players in the market that have not surfaced yet that are experiencing major growth such as http://www.freekii.com and as these grow and share the market for online advertising it skews the growth rate since they may not be included in top players for growth calculation.

The actual rate of growth in the next few years will be incredible and will make the last 10 years look pale in comparison. Remember the auto industry 100 years ago?

11. oohadvertising - January 14, 2011

Online advertising has become so diverse these days that there are more interactive options open to advertisers now. Internet advertising has recaptured the imagination of marketers, who see an enormous potential to raise the profile of their brands through vehicles such as paid search and online video.

Please feel free to call us in case any query generates regarding Advertising
or log on to our website for details. http://www.tdiindia.com

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