One of the first tasks I settled on when I returned to Europe this year was to update our online ad forecast. After months of research, I’ve just published that report, ‘Western European Online Advertising Forecast Through 2014’ – and I’m happy to say that overall, the picture that’s developed is one of an industry returning to health. 2009 wasn’t a great year for the market, but thanks to a strong fourth quarter it wasn’t the terrible year everyone was expecting either – and more importantly, it looks like the weakness was a short-term blip rather than the beginning of a prolonged market slide. Western European online ad spending – which we define as the total of display ad spending and search spending in 17 countries – totalled €9.6 billion in 2009, and will grow to €13.9 billion in 2014.
When you dig a bit deeper, however, it becomes clear that different sectors of the market will have differing fortunes over the next five years. We think the big story between now and 2014 will be online display advertising. After a year of stagnation in 2009 – when it grew by just 1% across Western Europe – we think display is starting to look as healthy as ever. With huge advances in targeting helping response marketers deliver their ads to the right users, and with rich ad formats convincing brand marketers to shift more of their budget online, display will grow by 4% in 2010 and hit double-digit annual growth by 2013.
We’re especially excited about the prospects for rich ad formats like pre-roll video ads and Flash-based creative. 2009 was the first year that these rich creative formats generated more spending than traditional online image ads in Europe. By 2014, rich ads will account for 63% of online display ad spending – and marketers will spend more than €1 billion on online video ads.
The flip side, however, is search – a market whose glory days are slowly coming to an end. Search is by far the largest sector of the interactive marketing space – generating more than twice as much revenue in Europe last year as online display advertising – and it will remain the largest sector for many years to come. But search’s time as the growth story of online advertising is nearly over. Because the market is so mature, year-on-year growth has declined for six straight years through 2009, and growth will continue to decline throughout our five-year forecast. Unless there are remarkable developments in search technology – developments that, frankly, we don’t see coming – by 2012 online display ad spending will be growing faster than search spending for the first time since the advent of search.
Forrester clients can read the full details of this research on our site.