Growth of Advertising on the Internet

As always, market forces are fundamental to driving growth. Armed with smartphones, tablets, PCs and smart TVs, people have been spending more and more time throughout the day on the internet. Businesses too are thriving on the internet where they discovered value propositions that never existed before. Many B2B firms and small and medium enterprises that scarcely advertised on conventional media, are increasingly doing so on the net where they are better able to target their ad spend. Global consumer marketing companies too are shifting ad spend to where their consumers are hanging out.

As the internet expanded, the glut of free online content diminished its perceived value. So, for the majority of online publishers, subscription income remained insignificant. Their reliance on advertising income spurred the expansion of the online advertising medium, even as the growth of the medium, competition among media owners, and poor consumer response led to a decline in advertising rates. Online advertising continued to thrive due to the rapid growth in advertising volume, which compensated for the erosion in rates.

As CPM (cost per thousand impressions) rates declined, publishers were compelled to place more ads on their sites to maintain profitability, resulting in an increase in supply of online advertising media. This trend coupled with the growth in demand, clearly portends that netizens shall continue to be bombarded with an ever-increasing slew of advertisements.

Advertising spend on the internet overtook newspaper in 2013 and TV in 2017, driven primarily by mobile. While TV advertising continues to grow, it is dominated by big consumer brands that need to reach out to the masses. For B2B companies and small and medium-sized enterprises that also need to connect with their customers, TV is less viable. With finely targeted customers in specialized categories, they rely heavily on direct marketing, and the internet is better suited to serve their needs. It is where their customers engage with them, and prospective customers can find them. The internet also helps these organizations save costs by cutting down on traditional approaches to direct marketing such as sales calls, mail, and trade shows.