Display and search growth set to slow

By Darren Davidson | 31 August 2010

The rate of growth in the Australian online display and search advertising markets is set to slow next year, according to a report by GroupM.

WPP's media investment arm, comprising Maxus, MediaCom, MEC and Mindshare, made the forecast in its annual 'Interaction 2010' report, which covers digital activity across all major markets as measured in US dollars.

The Australian display advertising market is predicted to increase at 10% to US $1.2 billion next year, up from $1.1 billion this year.

In search, spend will hit US $1.2 billion in 2011 from US $1.1 billion this year, representing growth of 10.2%. WPP said display grew by 20% this year, while search also expanded by the same margin.

Head of technology and innovation at Mindshare Kerry Field said the figures were crunched earlier this year when the Australian advertising economy was emerging from the GFC, but said a number of factors were limiting the display and search advertising markets.

"Display was naturally going to start slowing up. Video is pushing it along but something needs to be done about supply and demand, with demand outstripping supply. There needs to be more inventory in the market,” Field said.

“The other thing at play is CPMs [cost per thousand views] are decreasing on the banner side. Greater spend on performance networks is pushing overall market CPMs down - their technology is becoming increasingly sophisticated so buys can also be highly targeted."

Field said the rate of growth in search market had been “going gang busters” but it was tempered by a “slowdown as Australia came out of the worst of the GFC this year”.

She added the reluctance of Australia's major retailers to embrace e-commerce was also limiting opportunities in search, with a dearth of major brand names lacking a major e-commerce destination and, as such, having no need to launch paid-search campaigns to drive traffic there.

In terms of the global digital market, which the report classifies as “Interaction”, its share of measured advertising investment will increase from 19.5% this year to 20.6% next year. The rate of growth is set to climb 12.7% from 11.4% this year.

Looking ahead, WPP says the digital landscape will be shaped and dominated by a struggle between the industry and consumers over privacy; and a titanic technology battle between Apple and Google.

Consumer privacy will present publishers, advertisers and agencies with a “significant battle” as it comes to the fore.

“The challenge to advertisers remains how to innovate at scale, how to manufacture the content assets to populate the channels available and how to leverage data in a way which protects the consumer in environments that are acceptable to the brand,” the report states.

The report describes the closed environment of Apple vs. Google's open systems strategy as the next “Darwinian struggle in technology”.

“Apple has consistently demonstrated outstanding design leadership but through Android Google has created a developer, device and operator community that massively exceeds the potential for innovation of any one company”, it says.

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