Online ad revenue 'to surpass £40bn by 2011'

Growing Internet usage will boost global Internet advertising revenue to $81.1bn (£41.9bn) by 2011, according to new research from Piper Jaffray & Co.

The figure is more optimistic than a report by PricewaterhouseCoopers last year, which predicted that internet ad revenue would reach $51.6bn in 2010, based on an annual growth rate of 18.1%. Piper Jaffray's report predicts growth of 21%.

Other aspects of the report include:

• The user revolution

Piper Jaffray believes that the advertising world is going through a revolution. As passive consumers become more informed about purchase decisions, and take control of the consumption of content, this will cause a significant rise in the prominence of the internet as a ‘major content consumption and marketing medium’.

• 'Communitainment'

With the popularity of social media sites, the internet has become a principal medium for community, communication, and entertainment, hence the term. Piper Jaffray predicts that this will partially replace other forms of media, from magazines to television.

• The internet is mainstream

The internet is now a mainstream media outlet and rivals traditional media for reach and advertising revenue. By 2011, the report predicts that the internet will be second only to television.

• Search will dominate

Searching is the second most popular activity on the web, behind email. The report identifies five key trends in search:

1. Search engines are replacing portals

2. Search is becoming a branding tool

3. Google’s dominance is increasing;

4. Local search remains a looming opportunity

5. New search technologies are likely to expand the field.

• Ad networks

Due to internet fragmentation, online ad networks are experiencing increased demand. The report predicts that affiliate marketing will remain a vital marketing channel for advertisers due to its high ROI proposition.

For the global ad figure of $81.1bn, the report bases its predictions on growth of internet use worldwide, and that the adoption of online advertising is occurring at a faster rate worldwide than in the US.

In the UK, for instance, the internet accounts for around 10% of total ad expenditure, and this is expected to reach 20% in the next three years.

Piper Jaffray says the explosion of niche content online will also drive online spending by smaller advertisers on ad networks.

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