Web Advertising Grows Outside the US

Dec-18-2000: To provide some context, in the world of traditional (or "offline") advertising, US expenditures reached $236.8 billion in 2000, while offline advertising spending in the rest of the world was $218.9 billion. The US accounted for 52% of total offline advertising spending.

To provide some context, in the world of traditional (or "offline") advertising, US expenditures reached $236.8 billion in 2000, while offline advertising spending in the rest of the world was $218.9 billion. The US accountedfor 52% of total offline advertising spending.

In 2005, the picture will not have changed significantly. US offline advertising expenditures will grow to over $261 billion, while non-US expenditures will grow to $258 billion.

In 2005, the US will continue to account for slightly more than 50% of total offline ad spending. Note that these numbers include all advertising expenditures, including online, direct mail, yellow pages, and other non-media spending.

While US offline advertising has experienced a huge bull market in the past couple of years, growth rates are expected to moderate. Going forward, this is expected to reverse. As a result, over the entire period from 1998 to 2005, traditional advertising growth rates will not be too dissimilar.

Web Ads Continue to Snare Share of Global Ad Budgets

Quite a different breakdown is apparent for web-based advertising. Web advertising spending outside the US is robust, growing from $227 million in 1998 to $737 million in 1999 and to $13 billion by 2005.

While growth rates in any given year will exceed comparable rates in the US, total dollars of international web ad spending -- like the penetration of internet users and development of e-commerce -- remains a few years behind North America. Consequently, while the US percentage of global web advertising spending will decline over time, it will remain the biggest market in the foreseeable future.

In 1997, for example, the US accounted for 92% of the world's web advertising dollars. That percentage will shrink to 79% by 2001 and to 70% by 2005.

Total global web ad spending will reach $43 billion in 2005, with $13 billion coming from outside the US.

The US Continues to Loom Large

Web advertising, even more so than offline advertising, will continue to be highly skewed towards the US market. This reflects the US's significant lead in online penetration and e-commerce development -- two essential precursors to advertising.

Comparing the US percentage of online versus offline ad dollars shows the difference between these markets. While the US accounts for about half of the world's total offline advertising spending throughout the period, its share of online spending started at about 90% and will still be 70% even in 2005.

However, growth rates outside the US will exceed US growth rates in each year. Average annual growth over the period 1998 to 2005 will be nearly double outside the US -- 114% versus 67%.

Let's take one more different perspective, and look at web advertising as a percentage of total global advertising expenditures. Compared with the offline world, web-based ad dollars represented only 0.5% of total worldwide ad spending in 1998, but this percentage will rise to 8.3% by the year 2005.

A regional breakdown of global web advertising in 2000 shows that Europe is the next biggest market, accounting for 11% of global web ad expenditures.

In 2001, Europe will grow to $1.6 billion or 12% of the global total, while the Asia/Pacific region will reach nearly $800 million and account for 6% of total.

Projecting to the year 2005, the global web ad spending pie will be quite different. The US share will decline to 70%, while Europe's will grow 15% to $6.3 billion, and Asia/Pacific's share will reach $4.1 billion or 10% of total global spending.

In sum, global advertising markets are in good health, and web advertising is advancing rapidly. The US will continue to dominate web advertising but, over time, spending will equalize among global regions. Parity will occur at some point, but that time is not now.

David Halprin is a senior analyst at eMarketer. He is author of the recently completed eAdvertising Report, which provides a comprehensive overview of advertising and the internet. eMail him at dhalprin@emarketer.com with comments, suggestions, and questions.

Credits: Emarketer.com