Rich media, video leads online display advertising

Michelle Clancy | 10-10-2012

Driven by rich media and video, online display advertising spend in the U.S. will reach $12.7 billion this year and will grow by 17% annually to be worth $28 billion by 2017, according to Forrester Research. In Europe, the market is seeing slower growth compared to the U.S. Europe online display ad spend for 2012 will total 4.8 billion ($6.2 billion), and will grow at a rate of 13% to reach 7.7 billion by 2016.

When it comes to formats, rich media and video ads are the most popular formats for ad buyers, while static images are now declining at a rate of nearly 45%. They were outstripping video in revenue just two years ago. Meanwhile, text-based display ads are growing at a faster clip than rich media ads (both over 16%). But video will overtake them by 2014.

Forrester also said that changes in ad technology are only now making their presence known. Data targeting, real-time bidding and placements that are similar to those that ad buyers can get on TV are available but have yet to significantly impact the market.

The truth is, a lot of targeting options aren't worth the money [today], and most of the ad formats are not interesting to consumers. Performance isn't where it should be as a result," notes Sam Bloom of Camelot Communications, in the report.

The analyst firm found that when it comes to online display ad spending overall, CPMs will almost double by 2017 to $6.64. But those numbers are still not big enough to offset declines in more traditional media. The so-called "offline" display in the U.S. will actually contract by 13%, the firm first cautioned, driven by declines in radio, newspapers and yellow pages. However, the brightest spot for this category is in the area of cable TV, which will grow at 4.1% over the next five years.

Also price pressure and cheaper social media display ad units are driving down online spend package pricing. "Some of the decline can be attributed to the shift to less-expensive social media impressions, which weakens portals such as MSN and Yahoo," wrote Forrester Research in the report.