Google exec: 2005 the turning point for online ads
Search giant's advertising sales vice president says advertisers have switched from testing to investing in the decade-old medium.
Tim Armstrong, Google's advertising sales vice president, said in an interview before the Reuters Media and Advertising Summit that 2005 marked the turning point when advertisers switched from testing to investing in the decade-old medium.
"There is robust interest in online advertising and that interest is now turning into real dollars," Armstrong said, noting that market analysts are predicting a banner 2005 year with forecasts ranging from $10 billion to $15 billion.
"The experimenting and testing phase begun in the 1990s has ended. Corporate ad buyers are investing now," he said.
Jupiter Research estimates the U.S. online advertising market will grow 28 percent over last year, to $11.9 billion in 2005, moving to $13.6 billion in 2006 and $15.1 billion in 2007.
By contrast, Google, which dominates the fast-growing market for keyword-search advertising, has been growing at three times the industry rate, or around 100 percent a year.
Industry estimates put Google's market share at 30 percent of overall online ad spending, with as much as 40 percent of the category it dominates--paid search.
Armstrong said two factors are driving the race to boost budgets. Consumer adoption of the Web has far outpaced advertisers' commitment to the medium. More recently, Madison Avenue executives have begun advising clients to close the gap by committing more dollars online, Armstrong said.
The budget shift is benefiting not just Google but also Yahoo, and Microsoft's MSN, he said.
The acceleration of online ad budgets can be measured by the increasing number of companies marketing through online channels, the growing number of divisions within each company using the online medium and the percentages committed online relative to other media, the Google executive said.
Though estimates vary, analysts believe about 5 percent of U.S. advertising dollars will be spent online this year, up from about 2 percent just a couple years ago. In short order, 10 percent or more could move online, analysts say.
"Some are putting 10 percent or even more than 10 percent of their 2006 budgets into online," Armstrong said. By no means are all companies at this stage, he said, but the tide has turned.
Google is making progress on its strategy of expanding beyond keywords to offer advertising anywhere, Armstrong said.
"We started with text, we now offer graphic ads and are moving into print advertising," Armstrong said. Google has been selling print advertisements in a select number of technology trade publications and is talking to major publishers about expanding this approach across a variety of niche markets.
Video advertising will be a natural extension of these existing efforts, part of Google's long-term strategy to offer relevant advertising wherever possible.
Google's accelerating growth is being driven by brand advertising and site-targeting campaigns that extend beyond its core keyword advertising business, Armstrong said.
Executives of the Mountain View, Calif., company have previously said that more than 25 of the top 100 online advertisers are using its site targeting tools, which let advertisers create custom ad campaigns on hundreds of sites that are most relevant to a specific message.
Armstrong declined to say how many more of these major advertisers had adopted its site-targeting tools, saying only that, "We have seen continued growth within those major advertisers."