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Not such fast growth for web video ads Never mind that video is all the internet rage Jul 25, 2006 With video becoming a feature on so many web sites, one would think that video advertising would skyrocket over the next five years. But it’s not expected to, according to JupiterResearch in its latest forecast. While the amount spent on video advertising is expected to grow at 27 percent per year on average between 2006 and 2011, that’s far shy of some of the heady growth rates internet advertising has experienced. What’s more, even by the end of the forecast period, video advertising will still be the smallest component of display internet advertising. This insight comes as part of a forecast that predicts internet advertising will grow at 11 percent per year on average between 2006 and 2011, hitting $25.9 billion in 2011. At this rate of growth, Jupiter forecasts that the internet will account for almost 9 percent of all advertising spending by the end of the forecast period. “Large spending increases for paid search, online classifieds and rich media have continued to fuel the market, which will continue to grow at a brisk pace during the next five years,” writes Emily Riley, analyst at JupiterResearch, in the report. This growth comes after several years of better than expected performance for online advertising. In 2005, the category grew 40 percent, and this year growth is forecast to pace at 21 percent. Next year should usher in slightly slower growth, according to the forecast, of 12.7 percent. During the forecast period, classified, search and display advertising are predicted to see strong growth. Though from a small base, video will be the fastest-growing area of display advertising, with growth accelerating toward the end of the forecast period, rising to $1.3 billion from $0.4 billion this year. The reason that it is not growing faster is, according to the report, that currently “much of the video inventory online is haphazardly placed and users have not developed predictable viewing habits.” However, as broadband penetration increases and more sites sort out distribution channels, advertisers will boost spending on video. Rich media, another category of display advertising, will also grow smartly. The forecast is for growth of 21 percent per year on average over the five-year period and hitting $3.6 billion in 2011. In fact, as these two areas grow, Jupiter forecasts that they will cannibalize static display online advertising. Static advertising is expected to slump by 7 percent, to $1.5 billion by 2011. There are several reasons for the increase in rich media advertising. Technological advances and increased broadband uptake are two factors. But also significant is increased spending from consumer packaged goods and automotive categories, which are using online as an alternative to TV. These advertisers will pay for more expensive rich media and video advertising. Perhaps in part because of the arrival of these traditional advertisers, JupiterResearch predicts that the growth during the next five years will come both from direct-response advertisers, who were the early adopters of the internet, and brand advertisers. Search advertising is also forecast to continue to grow. By 2011, the category will capture $11.1 billion in ad spending. In 2006, search is expected to account for 41 percent of total online spending. By 2011, this figure will have risen to 43 percent, while display advertising will be just 36 percent. Propelling search forward, says Jupiter, are rising prices, as new marketers experiment with search and increasing competition for keywords. What’s more, as advertisers become more experienced with search advertising, they bump up the number of keywords that they use, increasing their spending. Meanwhile, in online ratings for the week ended July 16, the top four parent companies remained the same. Microsoft was No. 1, followed by Yahoo, Time Warner, and Google. EBay bumped News Corp. for the fifth place spot by about 2,500 unique users, according to Nielsen//NetRatings. Top brands switched around a bit with Google’s rise over MSN, leaving the top five brands as Yahoo, Google, MSN/Windows Live, Microsoft and AOL. GUS Plc once again retained the top spot among advertisers, delivering 6.95 million impressions to No. 2 NexTag’s 2.5 million. Verizon stayed in third place, followed by United Online and Netflix. Yahoo stayed the No. 1 advertising site with 18.27 million impressions, followed yet again by MySpace at 8.02 million, both up from the previous week. Sessions rose from 15 to 16, and domains visited per person rose two from last week to 38. Average PC time per person rose nearly 14 percent from last week to 16 hours, 31 minutes, and 42 seconds.
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