Web Advertising Eclipsed Newspapers in 2010
By NAT WORDEN
Web advertising in the U.S. resumed double-digit growth in 2010, outpacing traditional media and surpassing newspaper ad revenue for the first time, according to the Interactive Advertising Bureau.
In an annual report prepared by PricewaterhouseCoopers LLP, the industry group said total Web ad revenue in the U.S. rose 15% to $26 billion last year, rebounding from a 3% decline in 2009 caused by an economic recession. However, last year's growth rate is roughly half the growth the Web was posting before the global financial crisis of 2008. [SEE REPORT ATTACHED TO THIS POST.]
Nonetheless, the rebound will likely build confidence in the digital media business, as consumers embrace Web services like Facebook Inc. and Netflix Inc. with enthusiasm even while the media industry has struggled to forge solid business models from online content.
"Online advertising has reached a level of maturity comparable to other mediums that have been deemed as significant ad platforms," said Sherrill Mane, a senior vice president at IAB. "The fact that it's still able to post double-digit growth speaks to the power of the Internet at a time when the economy is still struggling."
The IAB estimates that Internet-ad revenue in 2010 surpassed that of newspapers, which amounted to $22.8 billion, as well as $22.5 billion from cable TV networks, $17.6 billion from broadcast TV networks and $15.3 billion from radio.
Last year's growth was led by a 24% gain in display advertising, like online banner ads and digital video ads, in a sign that major brands are growing more comfortable with the medium as a place to invest their marketing dollars. The trend bodes well for online content companies, like AOL Inc., that are betting on major brands shifting more of their spending to the web.
Search remained the largest online-ad revenue category in a testament to the continued dominance of Google Inc. Search accounted for 46% of online ad revenue in 2010, down from 47%. It grew by 12% for the year—roughly half the pace of display ads, which accounted for 38% of total revenue.
For the first time, the IAB's report included mobile advertising—a market that many expect to grow as popular devices like Apple Inc.'s iPad and iPhone become more prevalent. It estimated mobile revenue in 2010 came in between $550 million and $650 million.
The retail industry continued to be the largest source of online advertising dollars, accounting for 21% of the business in 2010, or about $5.5 billion in spending. Telecom companies made up 13% of online spending, while financial services accounted for 12% and auto advertisers made up 11%.
John Suhler, founding partner with private equity and media forecasting firm Verohnis Suhler Stevenson, noted on a conference call that a gap still exists between the percentage of time consumers spend using digital media and the percentage of spending that marketers allocate to the web.
"Dollars always follow eyeballs," said Mr. Suhler. "It's just a matter of time before we see that happen."