Interactive Advertising Revenue climb. What does it mean?
The IAB and PricewaterhouseCoopers LLP (PwC) today released the IAB Internet Advertising Revenue Report for the full year 2009. Not surprisingly, there was a dip in advertising spending online but not by a significant percentage. Spending dropped 3.8% which given the explosive growth rates of the last few years is probably more significant than the number implies. But the more interesting statistic was that fourth quarter advertising spending was up 2.6% from the previous year and 14% from the previous quarter.
Search revenue was $10.7 billion or 47% of the total spending (it keeps inching up every year) followed by display advertising at $8.0 billion up 4% from 2008. Digital video within the display advertising category saw a growth rate of 39% - the most explosive growth of all advertising types. Banner ads and rich media advertising stayed roughly the same.
What does this all tell us? Firstly, it reminds me of the famous Mark Twain quote, "The reports of my death have been greatly exaggerated" in this case the reference being to display advertising. Some people believe that display advertising is on the decline largely because consumers are interacting with each other across the social web. Yes, that's increasingly significantly and I believe social influence marketing is having a transformative impact on marketing but it isn't coming at a cost to display advertising. Display advertising is growing!
Secondly, it tells us that digital video is exploding and we're going to see new ad formats, more video watching and more video all over the Internet. I like to believe that content follows the dollars as much as the dollars follow the content and that's what we're going to see here. The question is whether it is exploding enough to compensate for all the talent and production costs that it require. I don't think it does today.
Thirdly, it tells me that the industry needs a better mechanism of assessing the influence of social media and social influence marketing on the advertising business. A segment of it is paid media and that piece is largely clubbed within the display advertising category so it is hard to see its true impact. The investments in earned media (in terms of employees, outreach efforts etc.) are largely ignored. What's the best way for the interactive advertising bureau to capture that? It doesn't fit in the traditional confines of advertising but is most certainly a form of marketing and dollars are being driven towards it.
Lastly, these numbers really highlight the shift happening from traditional advertising to digital. More advertising dollars are flowing to digital. A trend that we've been seeing in the last few years. I think we'll continue to see this but the pace will vary from industry to industry. It is also worth emphasizing that digital still doesn't have the scale and impact for awareness building that traditional has but it may some day.
These are indeed interesting times as the advertising world continues to evolve. More details on the research are available on the IAB website.
Follow me on Twitter (@shivsingh) for more insights on digital strategy and social media.
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