Spending Gap Between Search and Display Advertising Widens

Online advertising spending may be growing at an annual rate of 20 percent but the display ad market is stagnant and a sour economy can only make that worse.

According to eMarketer, spending on search ads is expected to grow 42 percent to $5.2 billion of overall U.S. online ad spending this year, while display should remain flat with about 21 percent of the market.

This is good news for Google, which controls 70 percent of search, but companies like Yahoo and AOL were betting that the growth of targeted display ads would narrow the gap. In this market, however, advertisers have become less interested in experimenting with display formats.

The Wall Street Journal reports:

CreditCards.com is typical. Jody Farmer, vice president of strategic marketing for the credit-card portal, says he has experimented with buying display ads. But as the economy tightens, the site, which spent $30 million on online marketing last year, is focusing on search ads. "We have to be a little more thoughtful about how we spend our money," he says.

Also today, JP Morgan analyst Imran Kahn lowered his forecast for the display advertising market, bringing his prediction for the 2008 U.S. display advertising market to $8.2 billion from $8.6 billion and his 2009 estimate from $9.4 billion from $10 billion.

Though he wasn’t bullish on the search advertising market, Kahn said that search "will fare better than the display market given advertisers' preference for performance-based advertising."