Search Advertising Outpaces Display Ad Growth

Online advertising growth continues to outpace the rest of the advertising industry. Internet advertising grew by 20% in the 2nd quarter of 2008, according the Wall Street Journal (WSJ) on September 4, 2008. However, a closer examination of this growth shows that search advertising continues to grow at a more rapid pace than display advertising. Search ad spending will represent 42% of online ad spending in 2008, which is up from 40% in 2007. Display advertising will remain flat at 21%.  Search advertising spending will reach over $10 billion this year, which is double the level of display advertising, according to eMarketer.

Significant Investment in Display Advertising

Google now controls more than 70% of the search advertising market, so they will benefit most from the forecast of continued growth in search through 2011 by eMarketer. Google’s competitors, Yahoo, Microsoft and AOL, have invested billions in technologies and companies that help them deliver more relevant and targeted display ads, in an attempt to “gain ground on Google,” according to the WSJ. In addition, Google has been trying to convince brand advertisers to buy more display ads on YouTube and has bet on the growth of display with their acquisition of DoubleClick last year. So a downturn in display advertising could negatively impact all of these major online rivals.

Search Advertising Also Vulnerable

The shift to more text based search ads is a result of advertisers and agencies viewing search as less risky and more of a direct approach to reaching consumers versus display ads.  However, with the economic slow down, some smaller businesses are cutting back on the number of keywords they buy. This appears to be offset for now by an increase in spending by larger marketers, according to John Aiken form Majestic Research (WSJ). Some feel that Google is displaying more ads for certain keywords to make up for any lost spending, but Google denies this and says that as search budgets increase Google has more relevant ads they can display, according to the WSJ.

Direct Marketers Understand the Value of Paid Search

Direct marketers and small to mid-sized businesses have been successfully using paid search ads for years. Direct marketers understand how search and DRTV, plus other forms of offline media, work together to help increase a campaign’s ROI. Now more brand and larger marketers and their agencies are utilizing search as part of their marketing mix, as they shift advertising dollars from offline media to online. It appears that more traditional marketers are finally beginning to understand the value of employing direct response advertising throughout their media mix, especially in a depressed economy, to aid them in measuring their marketing ROI.  It will be interesting to see how this shift to more direct advertising, such as paid search, by larger marketers, changes the direct response media landscape in the years to come.