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Online Ad Spending Spikes by 27%, Trend Likely To Continue

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Feb 11, 2008 

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Sarah Novotny  |

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Online Ad Spending Spikes by 27%, Trend Likely To Continue

Recession? What recession?

Internet ad spending surged in 2007, with revenue growing 27% year over year to $25.5 billion, the IDC reports Monday in its quarterly wrap-up. Expenditures in the fourth quarter of 2007 grew by almost 28% to $7.3 billion, compared to the same quarter the year before.

And all signs point to a continuing upswing: eMarketer predicts that spending on search engine advertising alone will rise from $8.6 billion in 2007 to $16.6 billion in 2011.

But the news wasn’t good for everyone. Google’s share of the market declined for the first time in two years, the IDC says. Its net U.S. online advertising market share shrank by 0.5 percentage points to 23.7% last quarter compared the third quarter of 2007. While the search giant’s ad sales grew by a little more than 40% in the fourth quarter of 2007, its year-on-year growth rate in the previous quarter weighed in at about 50%.

Some market watchers say that trend could continue too – if a certain rumored merger occurs.

“If a merger between Microsoft’s new media business and Yahoo! would come to pass, the combined entity would have a net U.S. advertising market share of about 17% based on our 4Q07 data,” says Karsten Weide, program director for IDC’s Digital Marketplace: Media and Entertainment service. “It would not quite bring Microsoft-Yahoo! to where Google is in online advertising in the U. S., but it would give them a much better fighting chance than if they went it alone.”

But dreams of a leveled playing field will have to be at least temporarily shelved. Yahoo’s board rejected Microsoft’s bid on Monday, saying it was too low.

Tags: ad-spend, finance and idc

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