Online Ads Up, But Online Video Ads Lag

The Internet may not be ready for primetime…video ads, at least.
The new "US Online Advertising Forecast, 2006 to 2011" report fromJupiterResearch estimates that advertisers will continue to spend online over the next five years, with the market reaching $25.9 billion — nearly 9% of total US advertising spending — in 2011.
Jupiter predicts that on average Internet advertising will grow by 11% a year between 2006 and 2011.
According to the research firm, online advertising spending grew by 40% in 2005, will grow by 21% in 2006 and continue growing at a brisk pace into the foreseeable future — with paid search being the primary driver.

"The large increase in search advertising is due to new clients experimenting with search and advertisers competing for keyword placement, which drives up prices," said Emily Riley, Jupiter Analyst and lead author of the report. "Additionally, as search advertisers mature, they start using longer lists of keywords, increasing their overall budget."
Even though online video advertising has been the cause of a great deal of excitement in the press lately — YouTube‘s phenomenal growth, AOL moving from a subscription to video ad-supported model, NBC and other major networks experimenting with making their hit shows available online — Jupiter is less sanguine on its prospects, advising that online video advertising‘s best years may be yet to come, not until 2009 or 2011, when video is expected to become a standard offering of online publishers.
By the end of the report‘s forecast period, 2011, Jupiter still expects video advertising to be only a small component of Internet advertising overall.
Even though video will be the fastest-growing area of online display advertising, it is starting with a small base, rising to $1.3 billion by the end of this year, up from $0.4 billion in 2006.

The reason that online video ad revenues are not growing faster, according to a recent article inMedia Life, is that currently "much of the video inventory online is haphazardly placed and users have not developed predictable viewing habits."