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Online Ad Spend To Gain 23 Percent In ’08; Lehman’s Anmuth Revises Forecast Down Slightly

Posted by Mort Greenberg on May 31, 2008

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Article Author: David Kaplan,

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Friday, May 30, 2008; 9:07 PM
Online ad spending in the U.S. will come in at $26.17 billion this year for a gain of 23 percent, forecasts Lehman Brothers analyst Doug Anmuth in his Internet Inside Weekly report (pdf only, not online). That’s down slightly from his previous 2008 forecast of $26.20 billion (+24 percent). Secondly, Anmuth expects online advertising to grow at a 20 percent 3-year compound annual growth rate (CAGR) and that the web will take an 11 percent share of total domestic ad dollars by 2010.

His latest forecast is right in line with ZenithOptimedia’s call for a 23.4 percent rise over 2007 and eMarketer is also expecting a 23 percent gain this year. Back in January, TNS, which only measures display, offered a much more pessimistic view, saying that category would be up only 14 percent in 2008. Also on the comparatively darker end, PQ Media, which lumps several categories like digital out-of-home under “alternative media,” said it believed that spending would climb just 20.2 percent over last year.

Search will still lead: Breaking out online ad spending into constituent categories, Anmuth finds search still in the lead with 27 percent growth, followed by display with 25 percent, while lead gen should be up 18 percent, as classified struggles to realize gains of 14 percent, all over 2007’s figures.

Opportunities: Anmuth emphasizes that the online ad market is about scale and that display in particular continues to be relatively open. That will continue to provide an opportunity for Google ( NSDQ: GOOG), Yahoo ( NSDQ: YHOO), Microsoft ( NSDQ: MSFT), and/or AOL ( NYSE: TWX) to take share, despite market trends that are moving more toward fragmentation and verticalization. Anmuth: “This open field in display is in contrast to search where we believe that over the past year Google has solidified its moat with advertisers and users in almost every market in which it operates.”

Display’s mixed bag: Display advertising, which accounted for 34 percent of total U.S. online ad spend in2007, while getting a boost from formats such as rich media and digital video, has faced several challenges recently. One of the biggest factors impacting overall display advertising has been the dramatic rise in “available non-premium” (or non-guaranteed) inventory over the past few years, which has resulted from the enormous growth in page views at MySpace and Facebook. That in turn, has fueled the rise of remnant ad networks, which tend to specialize in low-priced, unsold inventory (which Martha Stewart Living Omnimedia‘s ( NYSE: MSO) Wenda Harris Millard likened to the trading of pork bellies, decrying the commoditization of online ad inventory). That has led companies like MSLO and others to form vertical ad networks to support their premium pricing and placement offerings.

Anmuth will be giving a presentation at our EconAds seminar in NYC next week.. details on the seminar here.


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