The changing online ad landscape

Spending on conventional forms of online advertising such as banner and search ads could be about to decline significantly, according to a new study reported by ClickZ.

Online research company Borrell Associates argues display ads, such as banners and pop-ups, and ads connected to search terms, are going to be overtaken by online promotions as the most popular form of internet marketing in US markets.

Borrel Associates predicts that spending on internet banner and pop-ads will peak this year at $US12.6 billion before hitting the wall, so much so that we could see less than half that amount spent on display ads over the next four years.

The same goes for search advertising, although the drop off is likely to be a bit less dramatic –the report predicts spending in that area is likely to fall back slowly from a peak of $US16.9 billion this year.

They are likely to be replaced, according to the report, with more spending on online promotions involving things like free computer games, giveaways, vouchers and online contests.

According to Borrell Associates, spending on online promotions of $US8 billion last year is set to nearly triple over the next five years, to an annual $22.8 billion spend.

“What’s driving it is an overall dissatisfaction or nagging feeling on the part of advertisers that their advertising isn’t working, or that they’re overspending on it,” Borrell told ClickZ. “With the internet, they can go straight to consumers. If they’re having a sale, they can put it up on their web site and consumers will come to them, and if their web site is good enough, consumers will keep coming back.”