Know-How Exchange : Research/Metrics

Global Online Ad Spend to Surge 35 Percent

Online advertising spend worldwide is forecast to reach $11.6 billion, an increase of 35 percent from 2005; previously, Merrill Lynch had predicted 33 percent growth, writes MediaPost. In 2007, online ad spend growth worldwide is projected to reach $14.5 billion, an increase of 24 percent. Merrill's prior estimate was for 25 percent growth in 2007 - but that was before it had upped its 2006 figures.

The highest growth rate this year is expected to come in China (50.0 percent), followed by the U.K. (46.4 percent), France (45.0 percent), Australia (42.6 percent), South Korea (30.5 percent) and Japan (30 percent).



Broadband growth drives global online advertising and access spending to more than $260 billion by 2010

An increasingly competitive market and substantial investment in infrastructure will fuel expansion of broadband, boosting worldwide Internet advertising and access revenues to $265.6 billion in 2010 at a 12.9% compound annual growth rate (CAGR), according to PricewaterhouseCoopers"' Global Entertainment and Media Outlook: 2006–2010.

The Outlook defines the Internet advertising and access market as fees consumers pay to Internet service providers as well as online advertisers"' spending on display, classified, and paid search advertising. The market further includes spending on classified advertising from newspaper Web sites.

Asia Pacific will both grow the fastest and claim the largest spending in 2010, expanding to $110.3 billion at a 17.9% CAGR. Rising at a relatively moderate 11% CAGR to $83.4 billion in 2010, Europe, the Middle East, and Africa (EMEA) will lose its global lead to Asia Pacific in 2006, maintaining the second-largest position going forward. With $60.2 billion in revenues in 2010, the U.S. will represent the third-largest market, expanding at an 8.4% CAGR. Although the market in Latin America will remain small at $8.6 billion in 2010, it will boast the second-fastest regional growth of 14.6% compounded annually. With the smallest regional spending, Canada will increase at a modest 9% CAGR to $3.1 billion in 2010.

In the U.S., competition between phone and cable companies has resulted in decreasing prices and increasing speeds for broadband. These drivers, combined with desire to access high-speed applications (e.g., music, video games, movies), will boost near-term growth of broadband penetration, reaching 61.7% in 2010. Moreover, introduction of new delivery methods will continue to expand broadband"'s reach and encourage subscriber growth in the long term, with category spending reaching $30.8 billion in 2010 at a 9.6% CAGR. Although this expansion will adversely affect the dial-up market (declining to $3.8 billion in 2010 at 14.1% compounded annually), overall access spending will rise to $34.7 billion in 2010 at a 4.6% CAGR.

Online advertising revenues will also benefit from broadband expansion. Because broadband subscribers spend relatively more time online and high speeds facilitate new ad formats, mainstream advertisers will increase their online spending. Showing the fastest regional CAGR--15.2%--online advertising will make a major contribution to the overall market at $25.5 billion in 2010.

In EMEA, investment in infrastructure will facilitate reach, and government initiatives to update regulatory structure will stimulate competition and price declines. The resulting rise in total penetration to 57.6% in 2010 will boost overall access spending to $68.5 billion in 2010 at a 9.3% CAGR. With the broadband market primarily benefiting from overall drivers--mainly availability of triple-play packages and decreased prices--dial-up spending will decrease to $9.4 billion in 2010 at a decrease of 7.6% compounded annually. However, broadband"'s expansion to $56.7 billion in 2010 at a 14.7% CAGR will offset dial-up"'s loss, and further attract advertisers. Combined with increased spending on paid search, online advertising will climb to $14.9 billion in 2010 at a 21.2% CAGR.

In 2010, Western Europe will claim the largest spending, rising to $66.1 billion at a 9.9% CAGR. Growing the fastest, Central and Eastern Europe will reach $14.6 billion in 2010 at a 17.1% CAGR. By country, the U.K. will boast the largest market with $16.1 billion in 2010, expanding at a 13.4% CAGR. Germany ($14.1 billion) and France ($9.2 billion) will follow with respective growth of 10.3% and 10% compounded annually. Meanwhile, Russia will represent the fourth-largest market, expanding the fastest at an 18.6% CAGR to $9 billion in 2010.

In Asia Pacific, deregulation of the industry, combined with substantial development of infrastructure, will drive access spending from $44.7 billion in 2005 to $100.4 billion in 2010 at a 17.6% CAGR. By category, broadband will continue its worldwide lead, representing the majority of regional contribution. Fueled by government initiatives and carriers"' investment, the sector will reach $86.8 billion in 2010 at a 21.3% CAGR. Rapid expansion of broadband will further contribute to growth of online advertising, rising at a 21.7% CAGR to $9.9 billion in 2010. Although increasing at a relatively moderate 3.2% CAGR to $13.7 billion in 2010, dial-up will further advance the market.

The People"'s Republic of China (PRC) will primarily fuel global spending dominance of Asia Pacific. Accounting for 81% of regional growth during the forecast period, PRC spending will climb to $73.5 billion in 2010 at a 25.4% CAGR. With the second-largest spending, Japan will contribute $16.7 billion in 2010, followed by South Korea at $8.6 billion.

In Latin America, dial-up will continue to make the predominant contribution to the market, increasing to $4.5 billion in 2010 at an 8.5% CAGR. However, an improving economy has finally made broadband available in most countries, resulting in the sector"'s swift rise at a 24.9% CAGR to $3.6 billion in 2010. Broadband growth will also fuel increased spending on online advertising, rising to $512 million in 2010 at a 23.1% CAGR. Additionally, foreign and domestic investors"' development of infrastructure will boost landline penetration and further encourage overall subscribership, driving total access spending (96% of the regional market) to $8.1 billion in 2010 at a 14.2% CAGR.

By country, Brazil will have the largest market, reaching $3.9 billion in 2010 at a 14.7% CAGR. Argentina and Mexico will contribute the next-largest spending at $1.8 billion apiece, with respective growth of 13.2% and 17.3% compounded annually.

In Canada, competition between cable and phone companies, combined with increasing speeds, will drive the broadband market, reaching $2.2 billion in 2010 at a 10.2% CAGR. Broadband expansion will also boost online advertising, rising at an 18.8% CAGR to $821 million in 2010. Because market maturity will slow overall subscriber growth, overall access spending will rise at a relatively moderate 6.4% CAGR to $2.3 billion in 2010.


Maximus