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Google chief predicts spending on online ads will quadruple in five years

Spend­ing on inter­net adver­tis­ing will quadru­ple in the next five years as tech­nol­o­gy dri­ves it from being the adworld’s lit­tle sib­ling to the industry’s Big Dad­dy, tak­ing half of the total glob­al adver­tis­ing spend by 2018.

This is the bold fore­cast of Google Inc.’s Chief Busi­ness Offi­cer and SVP, Nikesh Aro­ra, at the recent D: Dive into Media Con­fer­ence in Dana Point. His pre­dic­tion may strike many as counter-intu­itive. Any­one who knows any­thing about online adver­tis­ing sales, from busi­ness devel­op­ment man­agers to search engine mar­ket­ing spe­cial­ists to adver­tis­ing sales man­agers, can tell you that ad execs can be a pret­ty con­ser­v­a­tive bunch and pre­fer to stick with what they know works. That’s why $700 bil­lion of the $800 bil­lion glob­al adver­tis­ing bud­get still gets poured into TV and print.

A sea change beckons

But the mod­est spend on inter­net adver­tis­ing today will expand by at least anoth­er $300 bil­lion in a few years, Aro­ra believes, thanks chiefly to one big cat­a­lyst: inter­net-con­nect­ed or “smart” TVs. As Aro­ra put it:

“There’s cur­rent­ly about $800 bil­lion in the glob­al adver­tis­ing mar­ket today. That’s a very large num­ber, but online adver­tis­ing accounts for less than $100 bil­lion of that number.”

He went on:

“There is a rea­son­able prob­a­bil­i­ty that over 50% of adver­tis­ing goes online in the next five years. The big tip­ping point we’re wait­ing for is inter­net-con­nect­ed tele­vi­sions. We’re wait­ing for things going from ‘nice-to-have’ to ‘must-have.’”

The rise of the smart TV

Giv­en that the adver­tis­ing indus­try has been using the same mod­el for the best part of a cen­tu­ry, the scale and rapid­i­ty of the tran­si­tion envis­aged by Aro­ra seems ambi­tious. But Google has been hard at work per­suad­ing the indus­try over the last decade that inter­net adver­tis­ing real­ly can make money.

A sign of things to come can be dis­cerned in its trans­for­ma­tion of YouTube, a devel­op­ment which has made it mas­sive­ly more appeal­ing to users and adver­tis­ers alike. Google has spent in excess of $100 mil­lion over the past few years to cre­ate new chan­nels, and accord­ing to its chief, Salar Kaman­gar, a video pack­aged into a spe­cif­ic chan­nel can attract 10 times more ad spend­ing per 1,000 users than if it sim­ply stood alone.

So far, Google’s suc­cess with smart TVs has been ques­tion­able; but that could be about to change.

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