We know that the spend on online advertising has been going up fairly consistently over the last 8 years (see table 1), but the rate of growth has been suppressed by the US economic turndown which began in early 2008. Of all the online display spend, the amount allocated to highly interactive units experienced a disproportionate amount of the downward pressure because of a hesitancy to experiment in a down market. However, we project that as the economy recovers, a disproportionately large amount of dollars will flood back into this segment. This is because of the incredible innovation that has taken place in online display during the downturn.
Table 1 Quarterly revenue growth online advertising industry
Comscore’s ‘Digital Year in Review 2009’ report discloses that users viewed 21% more display ads between the end of 2008 and 2009, and reported a growth 15% from Q1 2009 to Q1 2010. In context of the slow growth in revenue, this continuing growth of impressions reflects significant losses in average CPM pricing. A recent research publication by interactive advertising agency Razorfish is in line with these figures. In their ‘Outlook Report 2010’, Razorfish reports that the bad economy in 2009 has kept advertisers from experimenting with new social display ad technology. As the market bounces back, however, buoying up CPM prices will require better performance through these innovations that have been slow to market.
While growth of display ad revenue was slow, ad technology providers have not stopped innovating. For example, at Sprout we’re pioneering ways to make the production of highly interactive rich media ads more scalable. The combination of new technology and a recovery in the US economy, is expected to significantly boost the rich media ad spend. A recent forecast by Forrester research visualizes this expected growth of rich media display ads (see table 2).
Table 2 Forecast US Display Advertising Spend, 2009 to 2014 (source: Forrester Research)
Recent signals from major players in the industry also show us that there’s significant confidence around upcoming growth. Major acquisitions and announcements are happening in the online display advertising industry, the most prominent one of which is Apple’s introduction of the iAds. Not only is Apple putting its money on mobile display advertising, in the WWDC this week, Apple CEO Steve Jobs even announced that they’re expecting the iAds to generate no less than 60 million dollars in just the rest of 2010. Apple is not the only one jumping on the mobile display ad train, we’ve also seen Google getting on by acquiring Admob in May this year and Adobe partnering up with ad provider Greystripe to create ads that compete with the iAds.
That’s why we think the online display ad industry is once again poised to make some giant leaps forward in the upcoming years. Some major innovations are coming up and we are excited to be part of that at Sprout. In the past months, we’ve received a great deal of interest in our HTML5 authoring solution and we look forward to bringing that out of beta and fully into our product. Stay tuned.
Leave a response