EMarketer Raises Online Ad-Growth Estimates

Continued Strength in Search, Display Spur Revised Prediction

By Abbey Klaassen Published: June 26, 2007 NEW YORK (AdAge.com) -- What slowdown?

While there has been some speculation that the dramatic growth in online display advertising is starting to level off, that is not the case this year or next, said eMarketer, as the research firm revised its online ad spending estimates upward for 2007 and 2008.

Negative predictions about the economy as a whole haven't necessarily panned out, partly leading to eMarketer's revised upward estimates. Mearly 30% growth EMarketer is bumping up its 2007 totals from $19.5 billion to $21.7 billion, which means instead of 18.9% growth the industry will experience 28.6% growth.

While 2007 was expected to be the first year in the past three that growth dipped below 30%, now it will at least come close. Growth in 2008 is expected to be more robust -- again more than 30% -- to a total $28.8 billion, thanks to an injection of political spending dollars from the presidential election.

In 2009 eMarketer is finally predicting a slowdown, with online ad revenue growing at a reduced 18.1% clip. "A combination of seeing continued growth not just from Google but seeing it at places such as AOL, and seeing that when there's any good news from traditional media it's been online," said David Hallerman, senior analyst at eMarketer. And the growth isn't only coming from the usually hyped sectors of search and video. "One of the things that's most interesting is continued strength of display," Mr. Hallerman added. "It's become almost a standard add-on for campaigns. Yahoo's weakness ... has been in search more than display." What's changed? What has changed since the earlier 2007 estimates?

For one thing, when the estimates were created in September, Yahoo was issuing warnings of weaker-than-expected display revenue in a couple key categories. As Mr. Hallerman notes, they are still the second-biggest contributor after Google to the U.S. online advertising revenue. "But it wasn't clear other publishers would be gaining as much as they have," he said.

Additionally, there were more negative predictions about the economy as a whole -- and those predictions haven't necessarily panned out. Online advertising as a share of the total media budget will surpass radio this year, eMarketer said, and top 10% next year. EMarketer benchmarks its estimates against figures from PriceWaterhouseCoopers and Interactive Advertising Bureau.