Outsell: Online Advertising to Grow as PPC Falls

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Spending on pay-per-click advertising in the US will fall 1% in 2007 as overall online advertising spending grows by 18%. Meanwhile, spending on search engine ads will surge 39%, according to a new study by Outsell.

The company also predicted rises in cost-per-action ads and online sponsorships and a decline in broadcast and movie advertising. Outsell surveyed 1,000 US advertisers, which represent $6.5 billion in ad dollars.

Almost half (49%) of the companies surveyed said they planned to reduce spending on PPC ads due to click fraud. Last year, only 37% said they would do so. Outsell also reports that advertisers tend to believe that their own websites and email marketing campaigns perform better than search engine-powered PPC ads, and that the Internet is a valuable medium for brand advertising.

“It’s clear that pay-per-click will not continue its trajectory,” said Outsell VP Chuck Richard in an interview with Forbes.

In 2006 Outsell predicted that click fraud rates could reach as high as 15%. Shuman Ghosemajumder, business product manager for trust and safety at Google, a major proponent of pay-per-click advertising, said that the true rate was probably closer to 2%.

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