July 24, 2006, 12:00 AM

Online ad spending to reach $25.9 billion by 2011, Jupiter Research reports

Advertisers will continue to increase the share of total budget spent online, with online ads reaching $25.9 billion or almost 9% of total U.S. advertising spending in 2011, according to a new report from JupiterResearch.

Advertisers will continue to increase the share of total budget spent online, with online ads reaching $25.9 billion or almost 9% of total U.S. advertising spending in 2011, according to a new report from JupiterResearch.

Paid search is the primary driver of growth in the online advertising market, according to the report “US Online Advertising Forecast, 2005-2011.” Search advertising overtook display advertising in 2005 and will continue to be the largest online advertising component over the next five years, JupiterResearch said.

“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, JupiterResearch analyst and lead author of the report. “Additionally, as search advertisers mature, they start using longer lists of keywords, increasing their overall budget.”

Current online advertising spending is outperforming previous expectations, jumping 40% in 2005 and projected to grow 21% in 2006, JupiterResearch said. In addition to paid search, large spending increases for online classifieds and rich media are fueling the market, which will continue to grow at a brisk pace.

“While online display advertising spending will not be as large as search spending, several subsections of display advertising, such as rich media and video, will grow rapidly,” said David Schatsky, president of JupiterKagan. “However, high growth for these forms of new online advertising will begin to cannibalize static display advertising.”

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