Search spending tops in online

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Online ad spending will reach $15.7 billion this year and $25.9 billion by 2011, according to a new report from JupiterResearch.

The report, "U.S. Online Advertising Forecast, 2006 to 2011," predicts search will dominate online ad spending for the next five years. This year, search spending will total $6.5 billion, or 41.4% of total online ad spending, Jupiter projected.

Display advertising will reach $5.8 billion, or 36.9% of total online ad spending. Classified advertising spending will total $3.4 billion, or 21.7%.

"Search is incredibly effective," said Emily Riley, advertising analyst at JupiterResearch and author of the report. "As advertisers test search and understand how search can drive sales, they are driving more money into search."

Riley said the money is coming from existing as well as new advertisers that are allocating more of their ad budgets to search. By 2011, search ad spending will reach $11.1 billion, or 42.9% of total online ad spending, Jupiter predicted. Display advertising will total $9.2 billion in 2011 (35.5% of total online spending), and online classified advertising will reach $5.6 billion (21.6%).

"Within display advertising, while static ads will not grow, rich media and video ads will grow rapidly between 2009 and 2011," Riley said. "2009 is when video will really take off."

Some of the current obstacles to online video advertising include a lack of standardized video clips or shows available to advertisers, and lack of regularly scheduled online video content, she said. "When people's viewing habits online catch up to viewing habits on TV--where people will sit down and spend an hour or two watching--then online video will really take off," she said.

Advertisers will spend $400 million on online video ads this year and $1.3 billion by 2011, according to Jupiter. They will spend $1.4 billion on rich media ads this year and $3.6 billion in 2011.

Total online advertising will grow at a compound annual rate of 11% from 2006 to 2011, Jupiter projected.

A separate report released last month by Atlas, an operating unit of aQuantive, found a combination of sponsored search ads and display ads had a higher impact on conversion rates than sponsored search links or display ads alone.

The study was based on ad campaigns served by 11 advertisers, both b-to-b and b-to-c, using the Atlas ad serving system during the month of April. More than 10.8 million impressions and 2.5 million search clicks from 1.8 million users were analyzed for the study.

Three groups analyzed

Atlas analyzed three different groups: Users who clicked on an advertiser's sponsored search listing but were not served any display ads from that advertiser; users who clicked on a display ad but did not click on that advertiser's sponsored search link; and users who clicked on a sponsored search listing and saw one or more display ads from the same advertiser.

The research found that 44% of users who clicked on sponsored search listings also received display ads from the same advertiser.

The average conversion rate was 22% higher for users who clicked on an advertiser's search listing and saw a display ad than for users who only clicked on search listings, and 400% higher than for users who only saw a display ad.

Conversion goals varied by advertiser, but included some action taken on the site, such as purchasing a product or service, requesting information or registering on the site.

"There is a significant increase in conversion lift," said Young-Bean Song, VP of Atlas Analytics and the Atlas Institute. "Most advertisers are not paying attention to this at all. People haven't been looking at the impact of using search and display ads together."

To ensure they are getting the most out of their online ad campaigns, Song said marketers should: Measure the synergistic effect between search and display campaigns; buy display media that maximize reach to users who have clicked on an advertiser's sponsored listings; reduce frequency; and track media centrally.

Atlas also studied the impact of frequency of display advertising when used in combination with sponsored search. On average, users who viewed three or more display impressions in combination with at least one search click had better results than those who viewed only one or two display impressions.

However, there is a point of diminishing returns when display ad frequency is too high, Atlas found. It recommended using frequency caps for display advertising, with the caps varying based on advertiser and campaign objective.

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