Online Ad Spending Overseas to Hit $25 Billion by 2013

Marketers Expected to Put More Dollars Behind Search, Video, Social Media as Display Declines

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LONDON (AdAge.com) -- Internet ad spending is forecast to keep growing despite the recession, but the mix of online spending is changing as display falls further out of favor with marketers, leaving online alternatives to fight for the marketing dollar.

According to a forecast by PricewaterhouseCoopers, total internet ad spending in the Europe, Middle East and Africa region will grow to $25.2 billion in 2013 from $19.4 billion in 2008. At the same time, online display will drop to $4.8 billion from $5.1 billion. In the U.S., display-ad spending is expected to drop to $4.4 billion in 2013 from $4.8 billion in 2008. Incidentally, display will decline over the next two years but start growing again in 2011 -- it just won't be enough growth to make up for the earlier drops.

So if total spending grows between 2008 and 2013, but display, responsible for a large portion of the online-ad outlay, does not, what will drive the increase? For starters, search, which is expected to see steady, continuous growth through 2013. Marketers are diverting more and more of their online spend to search, not just because of its accountability but also because of the increasing sophistication of search strategies.

'The new home page'
Neil Eatson, U.K. head of media and search at AKQA, said, "I say it to so many of my clients: The search engine is the new home page for brands and businesses. People just don't see home pages anymore, because 80% of web use begins with a search engine. Google, MSN and Yahoo really do enhance the user experience, so more and more clients see search as the most cost-effective form of advertising."

Search is becoming more expensive as well as more desirable. Brands are competing for search terms and pushing prices up, which also helps to explain the migration of money away from display, where rates are plummeting.

It is not only search that is attracting extra marketing dollars; there are an increasing number of online options to choose from, making marketers less reliant on channels such as display. "There are new routes to a site or a campaign -- social media, when done well, is very powerful," said Steven Hess, CEO of Omnicom-owned Weapon 7. "Video carries more information more quickly, so it's more effective, but the brand needs to encourage the user to consume it." Video is expected to grow at compound annual growth rate of 8.3% in the U.S. and 19.3% in Europe, the Middle East and Africa.

Brands are also creating their own media, Mr. Hess said. "With sponsorship, widgets and microsites, brands are using created media to generate interaction," he said. "So the experiences they are creating are more open, more tailored to the consumer, the brand and the campaign. Who wants off-the-peg when you can have handmade?"

Any hope for display?
So is there any hope for display? The standard response is that you can't transpose old-world techniques onto new-world media, but some experts are optimistic.

Eva Berg-Winters, entertainment and media senior manager at PricewaterhouseCoopers, suggested that once the downturn passes, marketers will be more apt to use display.

"Because of the downturn, there's a shift in business models, and search is seen as the best return on investment," she said. "There's also a strong transition to classified, which is doing OK, even though it's based on weak sectors like jobs and auto. But online display is still in its infancy. Post-downturn we expect search and classified to hold up and for display to enjoy growth."

Alistair Beattie, head of strategic planning at AKQA, London, also sees potential in display. "Banners have been sold as a media where effectiveness can be directly measured by a click," he said. "If posters were measured by the number of times people reached over and touched them, they wouldn't be used. If you measure banners by clicks alone you are missing a trick -- we've made a rod for our own backs."

Instead, Mr. Beattie said banners should be measured through a process of noticing the effect on how consumers feel about a brand. He also warned that it's early. "People talk about the internet as just another media channel, but it's not -- it's a social revolution, and the industry is still relatively immature."

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