Targeted display ads seen driving online ad spend

The online ad sector is expected to grow 14 percent from 2010 to 2011, outpacing overall ad spending, which Borrell predicts will increase by less than 5 percent.

The forecast provides some welcome news for publishers that still rely heavily on advertising to support their digital products. While much of the industry’s focus is on paid content models, the bulk of online revenues are still driven by advertising. Startups such as Spanfeller Media Group and behemoths such as Hearst believe there’s still plenty of life left in the web advertising model. Hearst last week announced that ad revenues from its core websites core have increased by 46 percent this year vs. 2009.

But the online ad model is evolving. Borrell notes that the fastest-growing online segments are “the local sector, anything targeted, and everything involving social media.”

Local online advertising is expected to surpass $16 billion in 2011, up by almost 18% from $13.7 billion in 2010. Local advertisers’ spending on targeted display ads will more than double next year, surpassing $2.3 billion.

On a national level, spending on targeted display advertising will increase by close to 50 percent. Overall spending on targeted ads will reach $10.9 billion next year, Borrell says.

Publishers are positioning themselves for this increase in targeted advertising - even in the B2B sector. Last week, for example, Canon Communications announced a new behavioral targeting platform for its 45 B2B websites.

As advertisers bump up their investments in targeted campaigns, they are pulling back on run-of-site display ads. Borrell says that spending on ROS display ads will decrease next year by nearly 14 percent over 2010, from $9.5 billion to $8.2 billion.

Other notables from Borrell’s 2011 Ad Forecast Memo:

• National paid search ad spending will drop 11.3% in 2011, which Borrell attributes to lower pricing and churn. (By contrast, local paid search will increase by more than 10 percent.)
• Email advertising will see “moderately strong” growth in 2011, up 9% to $16 billion.
• Streaming video advertising will increase by more than 60% to $5.6 billion next year. Two out of every five streaming video ad dollars will come from local advertisers next year.
• Mobile ad sales will account for more than 20 cents of every online ad dollar spent next year.