Los Angeles Public Relations

Evolution of Advertising and the Internet

During the early 90s there was debate about the commercialization of the internet. Opponents to advertising tried in vain to prevent advertisers from taking over the internet. Consumers on the other hand voted to accept free information made possible by advertisement as opposed to subscription services.

As of 2009, we have staggering statistics that show us how far the internet and advertising have grown since they entered into a symbiotic relationship. A recent TNS survey on internet user activity said:

• 81% used a search engine
• 76% visited news sites
• 65% use weather forecasts
• 63% researched products before purchasing
• 61% visited a brand website
• 56% paid bills online
• 51% watched videos
• 50% used price comparison sites
• 44% listen to music

Every one of these categories exists partly due to subsidies from advertisement. The consumer in the end is the ultimate winner and in the long run has helped increase productivity in the larger economy.

The numbers are out now and we can quantify the economic impact of the internet on our lives. In terms of employment about 1.2 million people have jobs that are directly involved with advertising and commerce on the internet. And for every one of these jobs gives rise to 1.5 jobs elsewhere. This means, directly and indirectly internet advertising and commerce creates a total of 3.05 million jobs in America. In monetary terms, this amounts to $300 billion, about 2% of the U.S. GDP. In terms of payments the economic value is about $175 billion. Advertising services account for $20 billion, retail transaction around $85 billion and $70 billion in payments to ISPs. The additional indirect offline jobs that the advertising-supported internet takes the annual value up to $444 billion dollars. The time value of the internet is often overlooked. On average about 190 million people in the United States spend 68 hours a month on the Internet. A conservative valuation of this time is an estimated $680 billion.

The economy heavily depends on the advertising-supported Internet to foster innovation, entrepreneurship, and productivity. This is seen particularly among small businesses that create most new jobs in the U.S. In addition, larger companies in this sector, such as Cisco, Google, or Adobe, have shown stability through the current economic downturn and boost the U.S. balance of trade through their global sales.

Consider also the social benefits of the Internet, harder to quantify but including the power of access to information as well as greater flexibility in balancing work and family obligations through telecommuting. The economic downturn is accelerating consumer interest in social networks and online communities as a source of support. And 19 percent of all U.S. marriages are now the result of bride and groom meeting via the Internet. Social networks have helped in electing a President!

When regulators attempt to constrain the Internet, they need to be aware of its enormous and ever-increasing economic and social impact. The Internet is an economic powerhouse that drives U.S. competitiveness and productivity.

With the stock market finally reaching the 10,000 mark, the market looks better than it has in the last 2 years. There was a lot of debate about the future of advertising on the internet. One side claimed that with the death of newspapers and with it newspaper advertising, the trend could follow into online advertising as well. The previous quarter saw advertising revenue increase. And following this positive turn, estimates in the market place the advertising pie to grow to about 19% of the advertising market or $87 billion by 2013. This is a big leap considering in 2004 the numbers were at 4% or $18 billion.

To round up our look at the advertising economy on the internet, the recently released IAB Internet Advertising Revenue Report for the first half of 2009 is shown below.