Eye on the emerging
hot online categories
Along with other insights into emerging internet trends
By Diego Vasquez
Aug 23, 2011
The recovery is starting to slow in most forms of media as this year progresses, with radio reporting just 1 percent growth in second quarter and many newspaper companies once again seeing declines during the quarter. But one area that's still seeing gangbusters growth is online, where ad spending is forecast to rise 20.2 percent this year, according to a new report from eMarketer, to $31.3 billion. Online has been gaining share over traditional media for years, and that accelerated during the recent recession, when advertisers were looking for cheaper ad venues with high accountability. Through 2015, web ad spending will grow to $49.5 billion. Fueling that growth will be big gains in spending by retail, the largest online ad category, and consumer packaged goods, the current No. 5 category that will move to No. 4 within four years. Victoria Petrock, principal analyst at eMarketer, talks to Media Life about which ad categories have traditionally been strongest, which are recovering fastest, and why no ad categories will see declines over the next four years.
What have traditionally been the strongest spending categories on the web and has that changed over the past five years? Why or why not?
Retail, telecom and financial services have traditionally seen the largest shares of online ad spending. However, retail and financial services have been hard-hit by the recession and both their shares shrank significantly during that time: retail from 25 percent to 20 percent and financial services from 15 percent to 12 percent from 2007 to 2010.
Automotive, one of the largest industry spenders in overall advertising, also saw a recessionary slump. But the auto industry has been steadily investing in online advertising to supplement its traditional campaigns. It is poised to overtake telecom in terms of share next year, and financial services in 2013.
Retail spends nearly double the No. 2 category. Why is that? What makes retail so well-fitted to the web?
The top two factors are, first, the huge growth in online shopping adoption. Consumers are increasingly using online channels to buy everything, and it makes sense to reach them in the same place with marketing messages that help them make their decision about purchasing and leading them to the place where they will complete the transaction.
Online advertising is also more measurable and an ideal tool to drive ecommerce sales and show direct ROI.
Second, the trend of multichannel retailing. Consumers, before buying in stores, are more and more inclined to research products and compare prices online. Even if they don’t end up buying online, this research factor means online ads also can drive traffic to brick-and-mortar stores.
What avenues (email, banner, search, etc.) are getting the most dollars from retail and why?
Search has historically gotten the highest percentage of online retail ad spending. Online retailers must ensure they are findable above all else when a potential customer goes searching for a product or service.
But display advertising is on the rise as well, for both products and branding. With the growth of online TV shows, there are more opportunities for online video display ads. And the growth of Facebook and other social media have also added more inventory for online display on these sites.
However, programs work most effectively when formats are integrated and work together to reach consumers at different touch points and different points in the buying funnel.
Why will CPG see such a surge in spending over the next few years?
Traditionally, CPG companies have been heavily invested in traditional media, especially TV, for branding. The prevalence of online video has provided a very valuable channel for these companies to carry over their branding initiatives to the web. The interactive nature adds more edge to campaigns and gives consumers more opportunity to interact with brands.
Social media (both marketing initiatives and advertising) also plays an important role for CPG companies’ expansion into online initiatives for the same reasons.
Are there any ad categories where web spending will decline? Why or why not?
No.
Though some industries are more mature than others in their use of the web and growth rates differ, all the industries will continue to invest more in online. Regardless of how far along they are on the adoption curve, there is still potential for growth across the board.
One of the biggest reasons is the transition to online from traditional media. Especially with the decline of print media and the continuous growth of consumer time spent online, all industries are following the trends.
Is the spending in these ad categories mainly by large advertisers, smaller ones, or is it a mix of both? How has that changed over the years?
It has been always the mix of both.
Big advertisers will continue to spend more online. But a lot of smaller advertisers are starting to invest online as well. In fact, online often gives smaller advertisers the opportunity do more online because it can be targeted more precisely and costs less than big-budget traditional media such as TV.
Do these figures include social media? What sort of campaigns might that include?
They only include paid advertising that appears within social network sites, social games and social applications. They don’t include spending that goes toward developing or maintaining social network pages or other branded applications.
Which ad categories have been quickest to embrace social media and why?
Retail, media, entertainment, CPG and travel. Their products make it easier to engage general consumers, and they are not heavily regulated industries.
Other industries, such as healthcare/pharma and financial services, operate in a regulatory environment that isn’t always conducive to social media initiatives. Though many companies are testing the waters in these areas, there is still a lot of untapped opportunity and a good amount of “wait and see” regarding government regulators.
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