EMarketer reports that online advertising revenue set a new record for 2006. According to a report from Pricewaterhouse Coopers and the Internet Advertising Bureau spending for online advertising hit $16.9 billion in 2006. That’s an increase of 35% over 2005. The largest growth occured in search marketing and online display advertising. In fact, online display advertising grew at a higher pace than search advertising.

There are a couple conclusions that I feel can be drawn from this report. First of all, it means that advertisers will face stiffer competition for the online market. Search advertising has grown steadily and as a result pay per click rates have climbed significantly in the last couple of years. Smaller companies looking to capitalize on search advertising will have to allocate larger budgets and find better methods of targetting their message. In addition, advertisers looking to squeeze the maximum ROI from their online budget should seriously look at conversion. This is a good time to make those site updates that enhance the user experience.

The fast growth in display advertising suggests that some of the bigger players are diverting traditional media ad spend to online outlets. EMarketer concludes in their article that this growth suggests brand conscious advertisers are now moving online and I tend to agree. If you’re doing a lot of branding and traditional advertising, now is a good time to begin moving some of that ad spend online. The growth in this space means that we’ll see CPM rates rise as more brand building advertisers compete for online ad space. There are still good deals to be found in online advertising but it takes some good research to find them. Unfortunately, a lot of smaller advertisers are just throwing things at the wall and seeing what sticks. Online media doesn’t differ that greatly from traditional media in terms of matching your message to the demographics of the viewers. Do your homework. Ask about demographics, traffic, traffic trends and patterns. These all matter when targetting your message.

Last of all, I’d say if you’re an online publisher that derives revenue from advertising–this is all good news for you! Online advertising continues to grow and become more competitive which means higher rates for publishers. It also means that advertisers are going to be competing for prime space. Make sure you can make a strong case why your paritcular site is such a prime place. Work on collecting demographics. This will help you sell display advertising and increase your bottom line.

Early reports suggest that 2007 will see even higher growth in online advertising. Are you ready? If you’re an advertiser, know who your trying to reach. Do your homework in targetting your message. And if you do nothing else, make sure your site delivers a positive user experience or your conversion may suffer. If you’re a publisher, know who your audience is and know what your traffic patterns are.

This entry was posted on Friday, May 25th, 2007 at 12:54 pm and is filed under Small Business, Marketing, News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.