The Future of Ad Dollars: Flat, Up, or Down?

June 10, 2008

I recently heard a statement to the effect of “total dollars spent on advertising probably won’t go down”, and I wonder about that: though both on and offline ad revenue is growing, online grew 7x faster than offline (28% vs 4%).  Furthermore, over 90% of ad spending is still offline.  So global ad growth is really quite modest — despite internet’s impressive numbers.

The upshot is the vast majority of ad dollars have yet to make the switch.  But if advertising gets more precise online, then the cost to achieve a certain effectiveness of advertising should go down.

The result is the total dollars required to achieve the same level of global ad effectiveness might be substantially less than is currently being spent.  So even if the online growth continues to skyrocket, it might precipitate an equally or even more dramatic decline in offline ad spending.

Basically, if the improved effectiveness of online ads exceeds the global growth of the ad market, then total dollars spent on advertising will go down.  And frankly, I’d wager online ads are substantially more effective than offline — by 20%?  50%?  If so that means total ad spending might have a long way to fall.

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