When will the penny drop? US Online Advertising 3-5 times here..

Just announced: 2006 US online advertising hit $16.8bn, showing a 34% growth rate over 2005. That compares to NZ’s $65m and 48% growth.

One way to compare is by population – USA online ad spend was US$56 per person, and NZ online ad spend was $NZ$15.80 or US$10.80 per person. That US number equates NZ$81.60 per person, or $334m in online spend, which is over 5 times as much as today.

We can adjust the population result by the difference in GDP/Capita. NZ has $24,797/$41,339 = 60% of the PPP GDP per person than does the USA. So 60% of the US ad spend per person would give US$33.60 or NZ$49 per person in NZ. That equates to a total of NZ$200m online spend – over 3 times the current spend.

Another way to look at this is by the online percentage of total ad spend. In 2005 USA total advertising spend was $143bn, and if we assume that has moved to $150bn then online is now responsible for an amazing 11.2% of all US advertising spend. That would equate to $250m of online spend in NZ, or almost 4 times as much as today.

So US online ad spend is three to five times bigger than NZ, and is still growing at a staggering rate. The portends are obvious – at some stage kiwi advertisers are going to wake up to overseas trends and start shifting serious amount of spend online. The coming epiphany as advertisers scramble to catch up with consumer viewing habits will be something to see, and TV and newspapers will suffer a lot.

A caveat. In NZ the advertising stats do not include search advertising. Apparently search is about a third of total ads, so that would increase our numbers by 50%. That still means little in the face of the ad-spend gulf between NZ and the USA.


Published by Lance Wiggs