Display advertising is forecast to grow 13% in 2010 after a dismal performance in 2009 (down approximately 5% in the US), while US search advertising is forecast to grow 13%, up significantly from 2009's roughly flat year, according to research from JP Morgan.
Below, highlights from JP Morgan's Nothing but Net 2010 Internet Investment Guide.
Though display advertising will bounce back in 2010, the challenge of increasing ad space value and reducing inventory will persist throughout the year. However, recovery will likely be driven by an overall macroeconomic rebound as well as a number of other factors, including premium publisher moves to focus on price integrity, better formats of display advertising, more rich media advertising, and better integration with ad content and sponsor bases.
Stabilization of Major Advertising Categories
As the economy improves, a stabilization of major ad categories is forecast for 2010, but will vary by industry. Ranked by year-over year online ad spending growth, the top four industries are retail with 20% growth in online ad spending, followed by telecom (16%), financial services (12%), and automotive (11%).
Search Advertising Growth
On track to grow 13% annually, the search advertising market is forecast to perform more robustly in 2010, driven by higher ad budgets as a whole, an increased share of advertising dollars, and a recovery in CPCs.
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Search: International Growth Opportunity Strong
There is significant growth potential in advertising revenue outside the US: search players generate $65 per Internet user in the US,, while the international market is estimated to generate $15 per search Internet user. The gap is due to primarily the digitalization of content and lack of broadband penetration.
Advertising outside the US accounts for roughly 50% of global advertising revenues, pointing to significant growth potential in the international search markets. Increased mobile penetration and faster broadband will likely drive growth in 2010.
E-commerce Will Continue to Capture Share in the Retail Market
US growth in e-commerce is forecast to recover in 2010 as economic conditions improve. At the same time, a proportion of retail sales will to continue to shift online, driven by increases in online product selections, continued year-over-year improvements online for brick-and-mortar retailers, volatility and uncertainty in the offline retail space, and further improved efficiencies from site optimization.
Facebook to Dominate Social Media in 2010
Facebook now accounts for 5% of all time spent on the Internet worldwide. Moreover, Facebook is outperforming MySpace and other similar platforms due to various factors, including site trust, robust application economy, and scalability of platform.
Casual games integrated into the social network landscape underwent high growth in 2009, and such success points to a path of monetization of social media. Social networks will likely be better served operating as network platforms, similar to payment networks such as Visa or MasterCard, which benefit from network effects without a need to charge consumers directly.
Down the road, social sites are positioned to become key sources of referral traffic for publishers and retail sites, a long-term threat to search engines.
About the data: Findings are from JP Morgan's Nothing but Net 2010 Internet Investment Guide, released in January 2010.
