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Internet Advertising - US - July 2012

By 2017, online ad spend may surpass television ad sales, making online the leading arena for advertising in the U.S., resulting from increasing consumer shifts from traditional media to online video, internet radio sources including Pandora, Spotify, and podcasts, in addition to increasing access to the mobile web via rising penetration for smartphones, tablets, and 4G data plans.

Further driving expected increases in online ad sales is the increasing efficacy of online ads, with a higher percentage of consumers reporting that these ads result in an online or offline purchase. Yet perhaps the most central driver for increased online ad sales is the extent to which consumers are turning to the internet for product research, which is resulting in rapidly increasing sales of search ads. As such, how often consumers conduct research online, and their methods of doing so, are among the main topics of this report.

In spite of rapid growth, numerous challenges face the industry, including difficulty in serving relevant ads in spite of high-tech programming aimed to do just that, an explosion in potential ad space in the mobile app market, and increasing opportunities for “social context” advertising. This report focuses on how ad sellers can effectively market to brands, as well as how brands can best utilize the online space to appeal to consumers. To achieve this aim, subjects explored in the report include the reach and relevancy of search ads, banner ads, internet radio ads, and mobile ads, including ads placed in mobile apps. The report also presents consumer expectations for ads that entertain, attitudes to internet privacy, and the responses of teens and kids to internet ads.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                      • The market
                        • Figure 1: Fan chart forecast of U.S. total internet advertising sales, 2006-16
                      • Search dominates
                        • Figure 2: U.S. online advertising spend, by type of ad, 2010-11
                      • Market factors
                        • Rapid gains in share from television and print
                            • Figure 3: U.S. advertising expenditures, by media format, 2010-11
                          • PC penetration halts, but internet access universal among younger ages
                            • Mobile perfect outlet for reaching young and high-income consumers
                              • Figure 4: Smartphone ownership, by age, February 2012
                              • Figure 5: Cell phone features used in past 30 days, by household income, April 2011-November 2011
                            • Online and mobile shopping sales climbing, driving search ads
                              • Figure 6: Fan chart forecast of U.S. total online and mobile shopping sales, 2006-16
                              • Figure 7: U.S. smartphone shopping sales, at current prices, 2009-15
                            • Internet radio shows dramatic gains
                              • The consumer
                                • Women, higher-income consumers more likely to regularly research and shop online
                                  • Mobile ads still in early adoption phase
                                    • PC ads have greater reach with younger internet users
                                      • Relevancy remains a critical problem
                                        • Figure 8: Relevancy of ads seen, by age, March 2012
                                      • Relevancy driven by regularity of online research
                                        • Figure 9: Relevancy of ads, by number of products researched online in past week, March 2012
                                      • One in four clicked on search ad in last product research session
                                        • Email ads still drive sales
                                          • Asians and whites more likely to regularly research and buy online
                                            • Teens and kids click on ads, demonstrate pester power
                                              • What we think
                                              • Issues in the Market

                                                  • Does anyone want to see ads?
                                                    • Why is relevancy still a problem?
                                                      • Will inventory remain a problem?
                                                      • Inspire Insights

                                                          • Inspire Insight: Make It Mine
                                                            • Inspire Insight: Attention Economy
                                                            • Insights and Opportunities

                                                              • Reaching a young, affluent audience
                                                                • Figure 10: Number of computers owned at home, by household income, April 2011-November 2011
                                                                • Figure 11: Time spent online on activities other than email at home and work, by household income, April 2011-November 2011
                                                                • Figure 12: Smartphone ownership, by household income, February 2012
                                                              • Younger and more affluent shifting from traditional media to internet content
                                                                • Figure 13: Impact of internet on lifestyle, by age, April 2011-November 2011
                                                                • Figure 14: Impact of internet on lifestyle, by household income, April 2011-November 2011
                                                              • Targeting higher-income households with the iOS and Windows Mobile
                                                                • Figure 15: Mobile OS ownership and intent to own, by household income, February 2012
                                                              • Advertainment
                                                                • Figure 16: Increase in preference for ads that entertain, April 2009-November 2011
                                                                • Figure 17: Preference for ads that entertain, by age, April 2011-November 2011
                                                                • Figure 18: Preference for ads that entertain, by household income, April 2011-November 2011
                                                              • Getting local with mobile
                                                                • Figure 19: Attitudes to internet usage, by age, April 2011-November 2011
                                                                • Figure 20: Attitudes to internet usage, by household income, April 2011-November 2011
                                                            • Market Size and Forecast

                                                              • Key points
                                                                • Rapid growth
                                                                  • Figure 21: U.S. total internet ad sales, at current prices, 2006-16
                                                                  • Figure 22: U.S. total internet ad sales, at inflation-adjusted prices, 2006-16
                                                                • Fan chart forecast
                                                                    • Figure 23: Fan chart forecast of U.S. total internet advertising sales, 2006-16
                                                                • Market Drivers: Increasing Internet Usage

                                                                    • Key points
                                                                      • PC penetration comes to a standstill
                                                                        • Figure 24: Trends in personal PC ownership, 2009-11
                                                                      • Fixed-point internet access
                                                                        • Figure 25: Trends in internet access at home, 2010-11
                                                                        • Figure 26: Any access and at-home access to the internet, by age, April 2011-November 2011
                                                                        • Figure 27: Any access and at-home access to the internet, by household income, April 2011-November 2011
                                                                      • Home broadband
                                                                        • Figure 28: Broadband access at home vs. at work, in online sample, December 2011
                                                                      • Access to mobile internet
                                                                        • Figure 29: Trends in web browsing on cell phone, in past 30 days, April 2009-November 2011
                                                                        • Figure 30: Cell phone features used in past 30 days, by age, April 2011-November 2011
                                                                        • Figure 31: Cell phone features used in past 30 days, by household income, April 2011-November 2011
                                                                        • Figure 32: Access to 3G or 4G mobile internet on cell phone or tablet, by age, December 2011
                                                                      • Increasing use of websites
                                                                        • Figure 33: Trends in use of the internet, in past 30 days, April 2010-November 2011
                                                                      • Increasing amounts of time spent online
                                                                        • Figure 34: Trends in time spent online in past seven days on activities other than email, April 2010-December 2010 vs. April 2011-November 2011
                                                                      • Increasing use of specific activities
                                                                        • Figure 35: Trends in the impact of the internet on lifestyle, April 2009-November 2011
                                                                    • Market Drivers: Online and Mobile Shopping

                                                                        • Key points
                                                                          • Increasing online sales
                                                                            • Figure 36: U.S. total online and mobile shopping sales, at current prices, 2006-16
                                                                          • Increasing mobile sales
                                                                            • Figure 37: U.S. smartphone shopping sales*, at current prices, 2006-15
                                                                          • Online shopping and research cross age and income groups
                                                                            • Figure 38: Types of online research and shopping done in past 30 days, by age, April 2011-November 2011
                                                                            • Figure 39: Types of online research and shopping done in past 30 days, by gender, April 2011-November 2011
                                                                            • Figure 40: Types of online research and shopping done in past 30 days, by household income, April 2011-November 2011
                                                                        • Competitive Context

                                                                          • Key points
                                                                            • Online beginning to get its due
                                                                                • Figure 41: U.S. advertising expenditures, by media format, 2010-11
                                                                            • Market Segmentation

                                                                              • Key points
                                                                                • Search leads and keeps gaining
                                                                                  • Figure 42: U.S. online advertising spend, by type of ad, 2010-11
                                                                                • Mobile ad sales
                                                                                  • Figure 43: U.S. mobile ad sales, at current prices, 2010-16
                                                                                  • Figure 44: U.S. mobile advertising spend, by media segment, 2012-16
                                                                                • Retailers top segment by sector
                                                                                  • Figure 45: U.S. online advertising spend, by sector, 2010-11
                                                                              • Innovations and Innovators

                                                                                • DigitalTown gets local
                                                                                  • Vicks chases the flu
                                                                                    • Rovi capitalizes on smart TVs
                                                                                      • Local photo business limits costs through focusing on niche
                                                                                        • Levi’s premieres ad on Facebook before moving to traditional media
                                                                                          • shopkick rewards ad watching
                                                                                          • Exposure

                                                                                            • Key points
                                                                                              • Mobile ads still for early adopters
                                                                                                • Figure 46: Types of ad seen in past month on PC, tablet, or phone, March 2012
                                                                                              • Vast interest in local mobile couponing
                                                                                                • Figure 47: Interest in mobile couponing, by gender, April 2012
                                                                                                • Figure 48: Interest in mobile couponing, by household income, April 2012
                                                                                              • Reach for ads on combined platforms greatest for 18-24s
                                                                                                • Figure 49: Types of ad seen in past month on a PC, tablet, or phone, by age, March 2012
                                                                                              • PC ad exposure trends with age
                                                                                                • Figure 50: Types of ad seen in past month on PC, by age, March 2012
                                                                                                • Figure 51: Personal PC penetration, by age, February-September 2011
                                                                                              • Number of PCs per household
                                                                                                • Figure 52: Number of computers owned at home, by age, April 2011-November 2011
                                                                                                • Figure 53: Types of computers owned, desktop vs. laptop, by age, April 2011-November 2011
                                                                                              • Ads in apps offer twice the reach of mobile web ads
                                                                                                • Figure 54: Types of ad seen in past month on a cell phone, by age, March 2012
                                                                                                • Figure 55: Smartphone ownership, by age, February 2012
                                                                                              • Limited exposure for tablet ads
                                                                                                • Figure 56: Types of ad seen in past month on a tablet, by age, March 2012
                                                                                                • Figure 57: Tablet penetration in online sample, by age, December 2011
                                                                                                • Figure 58: Types of ad seen in past month on a tablet, by household income, March 2012
                                                                                              • Those aged <35 to retain highest levels of mobile exposure looking forward
                                                                                                • Figure 59: Planned acquisition in next month of first smartphone, tablet, or PC, by age, December 2011
                                                                                            • Relevancy of Ads Seen

                                                                                              • Key points
                                                                                                • Relevancy limited
                                                                                                  • Figure 60: Relevancy of ads seen, by type of ad, March 2012
                                                                                                  • Figure 61: Relevancy of ads seen, by type of ad, by age, March 2012
                                                                                                • Research drives relevancy
                                                                                                  • Figure 62: Number of products or services researched online in the past week, by age, March 2012
                                                                                                  • Figure 63: Relevancy of ads, by number of products researched online in the past week, March 2012
                                                                                              • The Research Process

                                                                                                • Key points
                                                                                                  • Company sites, Amazon, review sites top clicking on ads
                                                                                                    • Figure 64: Activities conducted as part of online research for purchases, by age, March 2012
                                                                                                  • Three quarters go online to research unfamiliar venues/services
                                                                                                      • Figure 65: Process for gathering information online for an unfamiliar venue or service, by service, April 2012
                                                                                                  • Conversion and Purchasing

                                                                                                    • Key points
                                                                                                      • Value of internet ads on the rise with higher conversion rates
                                                                                                        • Figure 66: Conversion to purchase from internet ad exposure, April 2009-November 2011
                                                                                                      • Email remains powerful marketing tool
                                                                                                        • Figure 67: Trends in interest in email to hear about new products and services, January 2005-November 2011
                                                                                                        • Figure 68: Willingness to provide email address to retailers, by gender, April 2012
                                                                                                        • Figure 69: Willingness to provide email address to retailers, by age, April 2012
                                                                                                      • The accidental shopper
                                                                                                          • Figure 70: Purchases resulting from leisure use of the internet, by age, April 2012
                                                                                                          • Figure 71: Time spent online on activities other than email, at home vs. at work, by age, April 2011-November 2011
                                                                                                      • Internet Radio

                                                                                                        • Key points
                                                                                                          • Pandora’s rise
                                                                                                            • Figure 72: Internet radio usage in past week, stations used, by age, March 2012
                                                                                                            • Figure 73: Online and satellite radio activities conducted in past 30 days, by age, April 2011-November 2011
                                                                                                            • Figure 74: Online and satellite radio activities conducted in past 30 days, by household income, April 2011-November 2011
                                                                                                          • Reach and relevancy
                                                                                                            • Figure 75: Types of internet radio ads seen or heard in past month on PC, tablet, or phone, March 2012
                                                                                                          • App usage
                                                                                                            • Figure 76: Download of music listening apps, by age, February 2012
                                                                                                          • Internet radio ad exposure
                                                                                                            • Figure 77: Types of internet radio ads seen or heard in past month on PC, by age, March 2012
                                                                                                            • Figure 78: Types of internet radio ads seen or heard in past month on a cell phone, by age, March 2012
                                                                                                            • Figure 79: Relevancy of internet radio ads seen or heard, by age, March 2012
                                                                                                        • Privacy

                                                                                                          • Increasing comfort in sharing information
                                                                                                            • Figure 80: Attitudes to internet privacy, by age, April 2011-November 2011
                                                                                                        • Search Engine Used

                                                                                                          • Google indomitable
                                                                                                            • Figure 81: Search engine usage, by age, April 2011-November 2011
                                                                                                            • Figure 82: Search engine usage, by household income, April 2011-November 2011
                                                                                                        • The Impact of Race/Hispanic Origin

                                                                                                          • Key points
                                                                                                            • PC ownership and online activity
                                                                                                              • Figure 83: Home computer ownership, by race/Hispanic origin, April 2011-November 2011
                                                                                                              • Figure 84: Number of computers owned at home, by race/Hispanic origin, April 2011-November 2011
                                                                                                              • Figure 85: Access to the internet, by race/Hispanic origin, April 2011-November 2011
                                                                                                              • Figure 86: Time spent online on activities other than email, at home vs. at work, by race/Hispanic origin, April 2011-November 2011
                                                                                                              • Figure 87: Impact of internet on lifestyle, by race/Hispanic origin, April 2011-November 2011
                                                                                                              • Figure 88: Online activities conducted in past 30 days, by race/Hispanic origin, April 2011-November 2011
                                                                                                              • Figure 89: Activities conducted as part of online research for purchases, by race/Hispanic origin, March 2012
                                                                                                              • Figure 90: Conversion from ad to purchase, by race/Hispanic origin, April 2011-November 2011
                                                                                                            • Asians often unintentional shoppers, blacks most interested in email
                                                                                                              • Figure 91: Leisure web browsing leading to a purchase, by race/Hispanic origin, April 2012
                                                                                                          • Teens and Kids

                                                                                                            • Key points
                                                                                                              • Teens spend 10 hours per week online
                                                                                                                • Figure 92: Time spent online, home vs. elsewhere, by gender and age, October 2010-November 2011
                                                                                                                • Figure 93: Number of websites visited by teens in past week, by gender and age, October 2010-November 2011
                                                                                                              • Life online on the rise for teens
                                                                                                                • Figure 94: Trends in weekly time spent online by teens, at home vs. elsewhere, October 2009-November 2011
                                                                                                                • Figure 95: Trends in frequency of teen online visits, at home vs. elsewhere, October 2009-November 2011
                                                                                                                • Figure 96: Trends in web browsing on cell phone in past 30 days among teens, November 2008-November 2011
                                                                                                              • Online shopping and research rise 50% among teens
                                                                                                                • Figure 97: Trends in types of online activities conducted in past 30 days by teens, November 2008-November 2011
                                                                                                                • Figure 98: Trends in teens’ internet and satellite radio usage in past 30 days, November 2008-November 2011
                                                                                                                • Figure 99: Internet ads leading to purchases among teens, by gender and age, October 2010-November 2011
                                                                                                                • Figure 100: Cell phone access to the web among teens, by age and gender, October 2010-November 2011
                                                                                                              • Kids
                                                                                                                • Internet usage on the rise
                                                                                                                  • Figure 101: Trends in incidence of kids’ web usage in past 30 days, November 2008-November 2011
                                                                                                                  • Figure 102: Trends in time spent online by kids, November 2008-November 2011
                                                                                                                • Kids’ internet activities
                                                                                                                  • Figure 103: Trends in kids’ online activities conducted in past month, November 2008-November 2011
                                                                                                                  • Figure 104: Online activities in past month among kids, by gender and age, October 2010-November 2011
                                                                                                                • Kids’ attitudes to internet ads
                                                                                                                  • Figure 105: Kids’ attitudes to internet ads, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 106: Trends in kids’ web browsing on cell phone in past 30 days, November 2008-November 2011
                                                                                                              • Appendix—Devices Used to Access Internet

                                                                                                                • Adults’ devices
                                                                                                                  • Figure 107: Trends in type of devices used to access the internet, April 2009-November 2011
                                                                                                                  • Figure 108: Devices used to access the internet, by age, April 2011-November 2011
                                                                                                                  • Figure 109: Devices used to access the internet, by household income, April 2011-November 2011
                                                                                                                • Kids’ devices and locations of access
                                                                                                                  • Figure 110: Trends in where kids use the internet, November 2008-November 2011
                                                                                                                  • Figure 111: Where kids use the internet, by gender and age, October 2010-November 2011
                                                                                                                • Teens’ devices and locations of access
                                                                                                                  • Figure 112: Trends in type of devices teens use to access the internet, November 2008-November 2011
                                                                                                                  • Figure 113: Devices teens use to access the internet, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 114: Where teens use the internet, by gender and age, October 2010-November 2011
                                                                                                              • Appendix—Additional Tables on Exposure, Relevancy, and Online Research

                                                                                                                • Types of ad seen
                                                                                                                  • Figure 115: Types of ad seen in past month on PC, by household income, March 2012
                                                                                                                  • Figure 116: Types of ad seen in past month on a PC, tablet, or phone, by household income, March 2012
                                                                                                                  • Figure 117: Types of ad seen in past month on phone or tablet, by age, March 2012
                                                                                                                  • Figure 118: Types of ad seen in past month on phone or tablet, by household income, March 2012
                                                                                                                • Relevancy
                                                                                                                  • Figure 119: Relevancy of ads seen, by type of ad, by age, March 2012
                                                                                                                • Research
                                                                                                                  • Figure 120: Number of products or services researched online in the past week, by household income, March 2012
                                                                                                                  • Figure 121: Activities conducted as part of online research for purchases, by number of products or services researched online in the past week, March 2012
                                                                                                                  • Figure 122: Activities conducted as part of online research for purchases, by gender, March 2012
                                                                                                                  • Figure 123: Activities conducted as part of online research for purchases, by household income, March 2012
                                                                                                              • Appendix—Additional Tables on Internet Radio

                                                                                                                  • Figure 124: Online and satellite radio activities conducted in past 30 days, by gender, April 2011-November 2011
                                                                                                                  • Figure 125: Relevancy of ads seen or heard, by number of products or services researched online in the past week, March 2012
                                                                                                                  • Figure 126: Types of internet radio ads seen or heard in past month on a PC, tablet, or phone, by age, March 2012
                                                                                                                  • Figure 127: Types of internet radio ads seen or heard in past month on a tablet, by age, March 2012
                                                                                                                  • Figure 128: Relevancy of internet radio ads seen or heard, March 2012
                                                                                                              • Appendix—Additional Tables on Internet Usage

                                                                                                                • Incidence and frequency of internet usage
                                                                                                                  • Figure 129: Trends in incidence of using and frequency of using the internet, at home vs. at work, April 2009-November 2011
                                                                                                                  • Figure 130: Incidence and frequency of using the internet at home, by age, April 2011-November 2011
                                                                                                                  • Figure 131: Incidence and frequency of using the internet at home, by household income, April 2011-November 2011
                                                                                                                  • Figure 132: Incidence and frequency of using the internet at work, by age, April 2011-November 2011
                                                                                                                  • Figure 133: Incidence and frequency of using the internet at work, by household income, April 2011-November 2011
                                                                                                                  • Figure 134: Impact of internet on lifestyle, by gender, April 2011-November 2011
                                                                                                                  • Figure 135: Increased usage of online shopping, by age, April 2011-November 2011
                                                                                                                • Increasing amounts of time spent online
                                                                                                                  • Figure 136: Online activities conducted in past 30 days, April 2009-November 2011
                                                                                                                • Attitudes to privacy
                                                                                                                  • Figure 137: Attitudes to internet privacy, by household income, April 2011-November 2011
                                                                                                              • Appendix—Responses by Parental Status

                                                                                                                  • Figure 138: Number of products or services researched online in the past week, by parental status and presence of children in household, March 2012
                                                                                                                  • Figure 139: Activities conducted as part of online research for purchases, by parental status and presence of children in household, March 2012
                                                                                                                  • Figure 140: Internet radio usage in past week, stations used, by parental status and presence of children in household, March 2012
                                                                                                              • Appendix—Additional Tables by Race/Hispanic Origin

                                                                                                                • Internet usage
                                                                                                                  • Figure 141: Where adults use the internet, by race/Hispanic origin, April 2011-November 2011
                                                                                                                  • Figure 142: Devices used to access the internet, by race/Hispanic origin, April 2011-November 2011
                                                                                                                  • Figure 143: Incidence and frequency of using the internet at work, by race/Hispanic origin, April 2011-November 2011
                                                                                                                • Search engine usage
                                                                                                                  • Figure 144: Search engine usage, by race/Hispanic origin, April 2011-November 2011
                                                                                                                • Ads as entertainment
                                                                                                                  • Figure 145: Preference for ads that entertain, by race/Hispanic origin, April 2011-November 2011
                                                                                                                  • Figure 146: Incidence and frequency of using the internet at home, by race/Hispanic origin, April 2011-November 2011
                                                                                                                  • Figure 147: Attitudes to internet usage, by race/Hispanic origin, April 2011-November 2011
                                                                                                                  • Figure 148: Interest in receiving local mobile coupons on smartphone, by race/Hispanic origin, April 2012
                                                                                                              • Appendix—Additional Tables on Teens and Kids

                                                                                                                • Teens’ internet usage
                                                                                                                  • Figure 149: Internet usage by teens, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 150: Trends in number of times teens have used the internet in past week, trended, November 2008-November 2011
                                                                                                                  • Figure 151: Frequency of using the internet among teens, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 152: Clicking on internet ads, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 153: Online activities conducted in past 30 days, by gender and age, October 2010-November 2011
                                                                                                                • Kids’ internet usage
                                                                                                                  • Figure 154: Time spent online by kids, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 155: Search engine usage by kids, by gender and age, October 2010-November 2011
                                                                                                                  • Figure 156: Trends in websites visited by kids, November 2008-November 2011
                                                                                                                  • Figure 157: Websites visited by kids, by gender and age, October 2010-November 2011
                                                                                                              • Appendix—Trade Associations

                                                                                                                Companies Covered

                                                                                                                • Amazon.com Inc
                                                                                                                • American Association of Advertising Agencies (AAAA)
                                                                                                                • AOL
                                                                                                                • Apple, Inc
                                                                                                                • Digital Media Association (DiMA)
                                                                                                                • Facebook, Inc.
                                                                                                                • Foursquare
                                                                                                                • Google, Inc.
                                                                                                                • Interactive Advertising Bureau (US)
                                                                                                                • MySpace.com
                                                                                                                • Netflix, Inc.
                                                                                                                • PricewaterhouseCoopers
                                                                                                                • Research In Motion (USA)
                                                                                                                • Spotify AB
                                                                                                                • TripAdvisor LLC
                                                                                                                • Twitter, Inc.
                                                                                                                • Verizon Communications Inc.
                                                                                                                • YouTube, Inc.

                                                                                                                Internet Advertising - US - July 2012

                                                                                                                £3,277.28 (Excl.Tax)