August 12, 2006

Video banners become very popular

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.

Search advertising, which overtook display advertising in 2005, will continue to gain share from display advertising. This is despite the growth of some components of display advertising, particularly video and rich media.

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.

via Media Life



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