Search Revenues to Reach $21.5 billion by 2011, According to New Piper Jaffray Research
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Written By Kate Zimmermann | February 22, 2007 | Share This
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Piper Jaffray has published a very comprehensive report on “The User Revolution: The New Advertising Ecosystem and the Rise of the Internet as a Mass Medium.” The 425 page document took over a year to produce and covers everything from the “Disintegration of Traditional Media Models” to “the Video Explosion” to “The Role of the Intermediaries: Ad Networks and Lead Generation.” In the Silk Road newsletter introducing the report Safa Rashtchy, Managing Director and Senior Internet Analyst at Piper Jaffray, says, “Consider this report as a warning of a storm that has already formed, a storm that will destroy many models and create new ones. Luckily, the full cycle of the storm will still take a few more years to complete, and there is still time to react.” Among their key findings, Piper Jaffray concludes,
- “We expect global online advertising revenue to reach $81.1 billion by 2011, representing a 21% CAGR (2006-2011). We expect U.S. online advertising revenue to reach $42 billion by 2011, representing 11.4% of total advertising budgets, up from approximately 6.6% of total advertising budgets in 2006. In the United States, we expect search revenues to reach $21.5 billion by 2011, slightly ahead of non-search revenues of $20.5 billion, while we expect both segments to grow at a CAGR of around 17% (2006-2011).
- “The consumer is…not only becoming more informed and confident about purchase decisions, but also increasingly taking control of the
consumption of information and content that used to be distributed by networks, studios, publishers, and retailers. We believe this trend will cause a significant rise in prominence of the Internet as a major content consumption and marketing medium.- “The Internet has increasingly become a principal medium for community, communication, and entertainment—three areas that have collided together and are impacting each other’s growth—generating a new type of activity that we call communitainment.
- “The Internet has become a mainstream media outlet that is now rivaling traditional media such as radio, television, newspapers, and magazines for reach and advertising dollars.
- “The proliferation of online and offline media outlets has resulted in shrinking television audiences and an increasingly fragmented media
landscape…The net result is that advertisers increasingly will need to buy more inventory, from nearly all types of media, especially the Internet, to have the desired impact.- “Search is the second most commonly used application on the Web with 550 million searches daily in the United States, and search marketing is a $15.8 billion global industry growing to $44.5 billion over the next five years. We believe the five key trends in the search industry are as follows: 1) Search is the new portal; 2) Search is becoming a branding tool; 3) Google’s dominance is increasing; 4) Local search remains a looming opportunity; and 5) New search technologies are likely to expand the field.
- “We believe Google’s wide variety of non-search-related products creates a virtuous cycle of brand affinity that drives incremental search volume.
- “We believe Internet video ads could become a game changer for large brand advertisers, who are used to the 15 or 30 second TV commercial. In today’s Internet, the advertiser must actively engage the user in order to create a brand impression.
- “Portals maintain the highest reach, but the fastest growing category of destinations is communitainment sites such as MySpace and Facebook. The most valuable advertising for broad reach inventory is in the Portal, Search, News, and Entertainment categories.
- “We expect affiliate marketing to remain a vital marketing channel for advertisers due to its high ROI proposition.
- “We expect large, multi-national traditional agencies to eventually have full interactive capabilities, largely through acquisitions of pure-play agencies.”
Topics: Advertising: Distribution, Search: News |
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