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Online Advertising to Reach Nine Percent of Total Ad Spend by 2011

Paid search is the primary driver of growth in the online advertising market, having overtaken display advertising in 2005, and it will remain the largest component over the next five years, driving online ad spend to nearly one-tenth of total U.S. ad spend.

JupiterResearch forecasts that advertisers will continue to increase the share of total budget they spend on online advertising between 2006 and 2011, with the online spend reaching $25.9 billion, or almost nine percent of total U.S. advertising spend in 2011. Moreover, current online advertising spending is outperforming previous expectations, jumping 40 percent in 2005 and projected to grow 21 percent in 2006, according to the new report by JupiterResearch, "US Online Advertising Forecast, 2005 to 2011."

"The large increase in search advertising is due to new clients experimenting with search and advertisers competing for keyword placement, which drives up prices," said Emily Riley, JupiterResearch analyst and lead author of the report. "Additionally, as search advertisers mature, they start using longer lists of keywords, increasing their overall budget."

Search is expected to increase from 41 percent of all online ad spend, or $6.5 billion, in 2006, to 43 percent, or $11.1 billion, by 2011, reports ClickZ, citing the Jupiter report. Certian subsets of display advertising, forecast to reach $9.2 billion in 2011, will undergo dramatic growth: rich media ad spend is expected to grow at a 21 percent compound annual growth rate (CAGR) through 2011, and video ad spend is projected to increase at a 27 percent CAGR.

"While online display advertising spending will not be as large as search spending, several subsections of display advertising, such as rich media and video, will grow rapidly," said David Schatsky, President of JupiterKagan. "However, high growth for these forms of new online advertising will begin to cannibalize static display advertising."

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