Yankee Group News Release

Yankee Group Forecasts US Online Advertising Market to Reach $50 Billion by 2011

Increased Online Spending and Improved Ad Targeting Help Drive Market Growth 24% Annually

Boston, MA, January 18, 2008Yankee Group today announced that the US online advertising market will reach $50.3 billion in revenue by 2011, more than doubling 2007’s revenue. The internet accounts for approximately 20% of overall media consumption in the US, but advertisers currently invest only 7.5% of their budget online. There is tremendous potential for marketplace growth as advertisers bridge this gap. By 2011, nearly 25% of all media consumption will be online, drawing 15% of the advertising dollars.

According to the recently published Yankee Group Research Report, The Cowboys Dance On…and On: 2007 Online Advertising Forecast, online advertising will grow rapidly in the coming year and beyond as the marketplace evolves. The factors driving this continued growth are:

  • Increased online audiences
  • The development of new types of advertising
  • The creation of new publisher business models that help sell interactive advertising

The internet has become the proving ground for new advertising formats, which will propel new media technologies into established print and television outlets. However, despite large online audiences and growing internet media consumption, advertisers& online budgets continue to lag compared with traditional media. The challenge for digital media companies is to convert internet media into online advertising revenue. This Yankee Group Report provides insight into how to confidently select the right platforms and adapt storytelling of business opportunities for the evolving multi-platform, digitized environment.

"With internet connectivity nearly ubiquitous, online advertising growth is inevitable," said report author Daniel Taylor, senior analyst at Yankee Group. "And yet the internet is still a relatively new digital medium. Steady growth in online advertising will require publishers to invest extensively in new media and advertising product development."

Yankee Group provides some key predictions for the online advertising market, including:

  • Search will get bigger before it gets smaller.
  • Don&t say good-bye to the &quout;dancing cowboys&quout; animated ads yet. Low cost per thousand (CPM) &quout;dancing cowboys&quout; ads will continue to drive much of the revenue growth even as high-CPM brand advertisers shift their budgets online.
  • Privacy will remain a sticking point with users.
  • Social networks will merge into the media fabric (though questions remain whether social networks are the cornerstone of digital media or if they are the &quout;better mousetrap&quout; of the ad server business).

Steady growth requires publishers to invest in new technologies, which lead advertisers to test new ad formats and consumers. Formats that work will become more commonplace, ultimately displacing the most popular forms today. "You have to spend money to make money, and the proverbial buck will stop with the publishers," added Taylor.

A must-read for all players in the advertising ecosystem including agencies, online publishers, digital media companies, advertising networks and enabling technology vendors, this report is available at www.yankeegroup.com.

Yankee Group (www.yankeegroup.com)
The people of Yankee Group are the global connectivity experts-the leading source of insight and counsel trusted by builders, operators and users of connectivity solutions for nearly 40 years. We are uniquely focused on the evolution of Anywhere connectivity, and chart the pace of technology change and its effect on networks, consumers and enterprises. Headquartered in Boston, Yankee Group has a global presence, including operations in North America, Europe, the Middle East, Africa, Latin America and Asia-Pacific. Visit www.yankeegroup.com.