Today we are going to take a step back and look at where the Internet stands as an advertising channel. As a Pay Per Click Manager I am very fortunate to be in a rapidly growing industry, and always interesting to track how stable this growth is, and when will it reach its peak. Late last week, the Interactive Advertising Bureau, or IAB, released IAB Internet Advertising Revenue Report for all of 2009, which was conducted by PricewaterhouseCoopers. It gives a good high-level view detailing the status of internet and search advertising as it currently stands.
I am going to report on their findings and show what they mean to the you the advertisers. First, lets dive into the report highlights.
For 2009, IAB gave us information based on an overall figure of “Internet Advertising Revenue” or the amount of money that advertising portals like Google Adwords made during 2009. IAB reports that the fourth quarter of 2009 posted a record high revenue of $6.3 Billion for these companies. As most of our clients know, the fourth quarter is typically where they spend the most in advertising due to the shopping around the holidays. 2009’s 4th Quarter marked a huge jump of 13.8% from the previous quarter, and a steady climb from 2008, of 2.6%. 2008’s 4th quarter was the previous high water mark, recording $6.1B in ad spend.
Though 2009’s fourth quarter set the record, overall, 2009 showed a 3.4% decrease in internet ad revenue, translating into $22.7B, compared to 2008 at $23.4B. A lot of this can be attributed to the overall markets performance and the fears over falling into a recession last year. IAB goes on to point out that out of all Internet advertising efforts, including: Display, Video, Sponsorship, Email, Classifieds, and other Advertising efforts;
Search by far takes in the lion share of ad spend, totaling $10.7B, or 47% in 2009. This is a 1% jump from 2008, when it took in a total of $10.5B.
As many of you know, search advertising is one of the best vehicles to respond to your prospect’s direct inquiries and win their business. This shows that many of those who do advertise online, would share that interest. This search value does not include spend on SEO, it is simply a reflection of spend in the world that we call Pay-Per-Click.
Let’s look at these numbers a little more closely and see what information we can pull from them. Then we will see how this translates to your business and advertising efforts.
Search jumped up in advertising revenue, showing steady 2% year over year growth. This is especially telling in light of the trends facing all internet advertising revenue, and beyond that, all US advertising – on and offline. As I mentioned, the IAB reported 3.4% decline in internet advertising revenue between 2008 & 2009. Nielson is reporting a 9% decline in all US Advertise Spend for the same time period, with 2009 coming in at $117B.
So, while the all advertising dollars are shrinking, and the internet medium is also losing some money, search is growing. It accounts for nearly half of all internet advertising, and its growth is coming at the expense of Classifieds, Lead Generation & Sponsorship advertising efforts. So even though all internet advertising brought in less revenue last year, and search is the biggest piece of that, search still grew!
It’s not surprising then that you, the retail sector, is the largest industry contributing to internet advertising, accounting for 1 out of every 5 internet advertising dollars made in 2009. Though this slipped by 2% from 2008, it is still far and away the leading contributor. By having a vehicle that can directly speak to consumers, when they are looking for what you sell, it is the perfect scenario to invest advertising dollars in.
Another way to look at internet advertising channels, is how they are charged. The study breaks this into three categories: Impressions (paying for how many people see your ad, like banner & directory advertising); Performance (paying for someone completing an action, like Pay-Per-Click); and Hybrid (including sponsorships and other methods). Impressions and Hybrids have been on a steady decline over the years, while Performance-based advertising has been rising, comprising of 60% of all internet advertising revenue in 2009. Search has captured this trend and is doing more to bring performance data into the mix. 2009 showed a sharper focus on not only conversions, but also conversion values, which is the cornerstone of our offering.
We have seen a much sharper focus in the ability to track how advertising is impacting businesses, and this has lead to better performance metrics, and the ability for new advertisers to trust internet advertising.
If you business depends on retail consumers, it would be good for you to invest in attracting them via search advertising.
Now what does this data tell us about what we can expect? They say with finances they can only do three things, go up, go down or stay flat. With the recent activity bucking the tradition of steady quarter-over-quarter growth, showing flat spend ¾’s of the year, and then a spike in Q4, we are either poised to stay flat or continue to build on last years benchmarks. It’s still early to report on 2010’s activity, but we are keenly interested using it to gauge how the rest of the year will go.
As the Yahoo & MSN merger takes hold and goes into effect later this year, there will be more stability for those looking for online advertising, and there appears to be more opportunity to increase ad spends as the combined properties take up more market share as an alternative to the giant #1, Google. By building up a larger, combined network, more advertisers will feel compelled to reach that audience, and with more advertisers comes more competition, leading to higher click prices, increasing overall budgets.
Another wildcard is the Mobile market, when will it really take hold. There are tens of millions of iPhones out there, and Google’s Android is currently the fastest growing mobile platform. This is showing adaption patterns similar to the rise of DSL & broadband in the late ‘90’s early 2000’s, which sparked the steady growth through that decade. Will smart phones mean the same for mobile advertising? On the plus side, they are bringing the internet to everyone’s fingertips, quite literally, no matter where they are. On the downside, the small screen really limits the volume of ads that can be served.
While we welcome industry growth, and encourage more advertising dollars going towards internet, and namely search, advertising, this recent plateau has opened up the door for innovation like we have never seen before. As load balancing issues stabilize, engines were able to focus on integrating different services (most notably, Google’s Ad Extensions, which we discussed in a video published on March 5th), further developing their core offerings, and even opening up totally new ways to advertise beyond search, including Google’s ReMarketing, which was discussed in the last two PPC Tuesday videos (March 30th & April 6th).
Also, if internet advertising is not growing over $1B every quarter, that means there is less competition readily entering the market and your click prices won’t be jumping up every month as you try to maintain your positioning.
We hope that as store owners, you get a good feel of where many of your advertising dollars are going, and this puts it into perspective. We have covered a lot of information, and I hope this has been helpful. To Learn More about Exclusive Concepts Profitable PPC product, or any of our excellent services in our suite of online marketing offerings including our Managed Conversion Testing Service, SEO Foundation or Precision Email Marketing, please don’t hesitate to contact us.
Also, if you have specific questions about how your PPC Account is structured – or would like to know if your account is setup to spend the right amount, sign up for one of our Profitable PPC Audits, they are quick, free, and offer some great insight in how to optimize your campaign.
Thank you, this has been Chris for Exclusive Concepts Daily Concept: PPC Tuesday. I look forward to talking to you next time.