ZenithOptimedia Ups Internet Ad Spend Outlook Again

Ad spending on the Internet is now expected to account for 7 percent of global ad spend by 2008. That’s according to a forecast from ZenithOptimedia, which upgraded its outlook from an April report that pegged the Internet’s share at 6.5 percent.

The company cited the “pace of development in Internet advertising” as the factor behind online’s increasing proportion of ad spend. The media company has steadily increased its estimates for online’s share. Prior to the April report, a December forecast had forecast the Internet’s 2008 market share to come in at just 6 percent.

If spending reaches 7 percent in two years as forecast, that will represent 76 percent growth between 2005 and 2008. In dollars, the Internet is expected to garner $23.9 billion this year, $28.6 next year and $32.5 billion in 2008. In 2005, ad spending for the Internet channel reached $18.5 billion.

Telecommunications and financial companies are the drivers of growth on the Internet. Between 2001 and 2005 the two sectors increased ad expenditures on the channel by $1.7 billion, which accounted for 17 percent of the growth in total Internet ad spending over that period. Retail, which is identified as an early adopter of Internet advertising, has remained at about 3 percent of spending on the channel over the last five years.

Though previous forecasts expected the Internet to overtake outdoor in 2007, the current outlook says it will likely happen this year.

Zenith Optimedia expects growth of ad spend in all media to come in at 6.1 percent in 2006. Next year, spending is expected to increase by 5.3 percent, and in 2008 it is forecast to rise 5.6 percent.

The slowdown in growth is not indicative of an advertising recession like that experienced in 2003, according to researchers. Both the ad market and the global economy are growing at slightly above average rates and advertising’s contribution to the total GDP is stable. Previous ad recessions occurred after a period when advertising grew faster than the GDP for several years. “This suggests that the current regime of steady ad spend growth will be sustainable for several years to come,” the report said.