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Industry Trend FAQ
What are the greatest areas of growth in the online advertising market between 2005-2008?
Recent research indicates that the greatest area of growth for online advertising for the 2005-2008 period is paid search or Pay-Per-Click (PPC) advertising. It is estimated that as a total share of online advertising, paid search is expected to increase from 20% (2005) to 39% (2008). This is almost a doubling in the proportionate share of online advertising.
US Online Advertising Spending, By Format, 2002-2008 (in millions)
Format | 2002 | 2003 | 2004 | 2005E | 2006E | 2007E | 2008E |
| Paid Search | $927 | $2,543 | $3,931 | $4,690 | $5,387 | $6,045 | $6,738 |
| Display Ads | 1,754 | 1,526 | 1,685 | 1,978 | 2,195 | 2,480 | 2,625 |
| Classified | 902 | 2,543 | 1,591 | 1,921 | 2,394 | 2,868 | 3,325 |
| Rich Media | 301 | 581 | 796 | 1,017 | 1,330 | 1,783 | 2,275 |
| Sponsorships | 1,093 | 727 | 796 | 961 | 1,197 | 1,550 | 1,750 |
| Slotting Fees | 481 | 218 | 187 | 283 | 266 | 155 | 175 |
| Referrals | 60 | 73 | 187 | 226 | 266 | 310 | 350 |
| E-mail | 240 | 218 | 187 | 226 | 266 | 310 | 263 |
| Interstitials | 240 | 145 | - | - | - | - | - |
| Total (in billions) | 6.0 | 7.3 | 9.4 | 11.3 | 13.3 | 15.5 | 17.5 |
| Est. cost of click fraud (millions/billions) | $300M to $1.2B | $370M to $1.4B | $470M to $1.9B | $570M to $2.26B | $670M to $2.86B | $780M to $3.10B | $880M to $3.5B |
Source: eMarketer, November 2004
How does the growth in online advertising affect the incidence of click fraud?
As online advertising grows as a percentage of total advertising budgets, there are greater incentives for perpetrators to commit click fraud, reducing ROI (Return-On-Investment) for advertisers. Greater demand for, and prices bid for, popular keywords raise the financial incentives for perpetrators by develop schemes to create the illusion of legitimate clicks with no real intention of clicks being converted to sales (e.g., non-converting clicks).
How does the growth in B-to-B (Business-to-Business) e-commerce spending affect the incidence of click fraud?
There is strong empirical evidence that suggests that as B-to-B e-commerce spending increases, so does the amount of paid search online ad spending. Estimates indicate that from 2005-2008, B-to-B e-commerce spending will nearly double from US$767M to US$1.3B between 2005-2008.
This increased amount of B-to-B e-commerce spending and paid search online advertising will increase the amount bid and paid for, keywords. Higher keywords increase the financial incentives for affiliates and others to perpetrate sophisticated schemes of click fraud, costing advertisers billions of dollars in overbillings every year.
B-to-B e-commerce Spending in the US, 1998-2008
(in billions, and increase vs. previous year)
Year | Internet Spending (in billions) | % Change (vs. previous year) |
| 1998 | $40 | - |
| 1999 | 95 | 137.5% |
| 2000 | 272 | 186.3 |
| 2001 | 466 | 71.3 |
| 2002 | 517 |
|
| 2003 | 551 |
|
| 2004* | 624 |
|
| 2005* | 767 |
|
| 2006* | 978 |
|
| 2007* | 1,165 |
|
| 2008* | 1,334 |
|
| Compound annual growth |
|
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| 1998-2003 | - | 92.7% |
| 2003-2008* | - | 19.3 |
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