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Online Advertising's Great Digital Race

Looking Ahead

In the last couple years, digital advertising has looked a little like an ultramodern version of the great race to the west coast.

Are there any corners left in the online world where advertisers can plant a flag? In the great digital race to monetize the Web, what will they think of next? Plenty.

Although it would be wrong to say that digital advertising is still in its infancy, it is still a young industry. By most accounts, online advertising still represents less than 10 percent of companies' overall corporate ad budgets.

Looking ahead to 2008, it is hard to steer clear of the ominous talk of recessions, credit crises and the attendant mortgage fallout. The Fed's been cutting rates and the president has pledged to freeze the rates of hundreds of thousands of subprime borrowers who got swept up in the real estate boom in the first half of the decade. All to forestall a potential recession that some analysts warn is inevitable.

The belt-tightening is already underway, according to reports from two of the world's largest advertising groups. Universal McCann and ZenithOptimedia predict that overall ad spending will see only modest growth next year, but that the industry will not enter recession.

The outlook may be somber for the ad industry at large, but analysts look for online spending to buck the trend.

eMarketer has projected online ad spending to roughly double over the next four years, and analysts universally agree that companies will shift more of their ad budgets to new media.

"Don't expect any large growth in total media," eMarketer's David Hallerman said. "The shift away from traditional media is accelerating."

So companies are spending more money on new modes of advertising. The most reliable of the digital ad formats is, of course, search.

The largest single category, search advertising accounts for about two-fifths of all digital ad spend, about twice as much as banner ads and online classifieds.

But, like a fifth-year senior in high school, those three categories are the oldest of the young. They are established, understood, and relatively unchanging. Smart companies send their ad dollars where their customers are going, so they will certainly spend more money on the big three, but there will not be much talk of a revolutionary new ways to place search ads or banners. Contextual and behavioral targeting will continue to improve, reducing ad waste, but those media strategies have become self-sustaining.

So what, then, will be the challenges of 2008? Which trees will the executives be shaking next year to get the ripe fruit to fall?

Next Page: Video May be Huge, But Where's the Business Plan?