Video Display Ads A ‘Strategic Threat’ To Google?

Gary Price points us to a recent IDC online ad forecast that says search will lose some of its appeal as display (specifically video) ads become more popular and prevalent online. The release identifies this anticipated shift as a “strategic challenge” to Google. While that characterization is attention getting, the reality is not as dramatic.

First, a summary of the reports findings, which says search will remain the online leader in overall spend but will see its percentage share of online spending drop:

IDC forecasts that Internet advertising will grow about three times as fast as advertising overall during the forecast period. The overall revenue of Internet advertising will grow from $16.9 billion in 2006 to $31.3 billion in 2011 at a compound annual growth rate (CAGR) of 13.5%.

Search advertising will retain its number 1 position as the advertising format garnering the most ad spend. However, even though absolute spending on search advertising will continue to increase, its market share will slowly decline from 40% in 2006 to 32% in 2011 as video advertising grows.

Display and rich media (including video) advertising is expected to grow more rapidly than search by many forecasters as brand advertising dollars shift online to varying degrees. As this BusinessWeek ad agency and marketer survey shows, online display advertising (“online brand“) will likely enjoy more interest and spending increases than search. One reason for that, as this slide shows, is that marketers remain skeptical about the value of search as a branding medium.

Google acquired YouTube in part so it could attract more branding dollars. It has yet to fully monetize that asset but is moving to do so. Google’s Universal Search initiative also makes video available on Google.com search results. We will almost certainly see display advertising on Google.com results at some point in the future — which could well include video.

Google’s TV distribution efforts are also aimed at brand advertisers. And while not online per se they will attract brand advertising dollars to Google (as a platform) in addition to the other efforts described above.

And then there’s that little DoubleClick acquisition . . .