It shouldn’t come as a surprise to anyone that online advertising is here to stay. The ability to reach such large segments of the population is not an opportunity that any advertiser worth their salt can afford to overlook.

However, just as there can be unforeseen trends in financial markets, it looks as if some of the projections regarding online advertising that were made back in the first years of the 21st century may, in retrospect, have been a bit conservative.

While it was predicted that paid search advertising would overtake display advertising, the actual numbers show that it happened faster than was expected. In 2006 paid search advertising overtook display advertising as the dominant advertising format in Europe. By 2007 it accounted for 43% of Western European online ad spending. By 2009 it was up to 46% with projections showing that the initial estimates that paid search advertising will account for over 49% of the online advertising market by 2012 may be inaccurate, it could very easily account for over half of the Western European online ad spending by that time.

Higher Than Expected

These unforeseen numbers are due to several factors, the first being an unexpected growth of paid search advertising even in those markets considered to be “mature” markets. Secondly, there has been an unprecedented use of social media sites, a phenomenon that has opened up large segments of new display ad inventory. Thirdly, advertisers have been quicker than in expected in reacting to the switch from traditional advertising methods to online advertising.

As JupiterResearch predicted, spending in the various categories of online advertising, primarily paid search, display ads and online classifieds has been increasing exponentially each year. In fact, it now seems that their prediction of €13.9 billion being spent on online advertising per year by 2012 may actually be exceeded.

Hardly surprisingly, social media sites have proven to be one of the biggest reasons for the jump in online advertising. These large untapped markets have proven to generate rapid growth in display ad inventory across Europe but they are quickly adapting themselves to paid search advertising markets. The ability of adservers and ad networks to improve the value of their inventory can be credited in part to the effective leveraging of new targeting and optimization technologies.

While advertisers are continually looking for “new” markets to develop, it is interesting to note that online markets do not run out of steam nearly as quickly as traditional advertising markets. This may be due in part to the incredible flexibility of online advertising and its ability to adapt to changing markets and market trends. This is particularly true of paid search advertising.

Paid Search Advertising

Even in the UK, which is considered to be a “mature” market, revenues generated by paid search have continued to show an increase each year since 2006 when JupiterResearch presented their initial report. But even though indications are that the UK market is slowing, it is just coming up to speed in other paid search markets, primarily France, Germany and the Netherlands and there is no predictable end in sight.

Online Classifieds

But paid search advertising is not the only kind of advertising that has shown an increase over the last four years. Online classifieds have shown an increase in European markets as well. While online classifieds are more popular in Austria, Ireland and the Netherlands than in the UK and Germany, online classifieds as a whole still account for 40% of the online ad spending in Europe.

Banner Ads

Banner ad networks has improved as the advertising platforms that support them, platforms such as Google, AdSense, Yahoo! and MSN, integrated sophisticated adserving technologies. The surge in growth in the use of these platforms has generated a tremendous growth in banner advertising. The projected 2012 revenue of €1.5 billion in the European market may actually have been underestimated.

Video

Video advertising is another segment that has grown faster than was expected. In fact, it has increased from € 87 million in 2006 and has almost reached its predicted 2012 mark of €929 million, which means that the actual 2012 numbers may be far higher than originally expected. Much of this growth has been generated by in-stream ads as Europeans have increased their watching of online video content. In fact, video advertising has been becoming progressively sophisticated. Indeed, it is hardly a stretch to accept that by 2012 rich ad formats including rich media and video, will account for more than half of Europe’s display ad spending. Rich media has already nearly caught up with traditional image-based display advertising, not surprising given the amount of time that the average consumer spends online.