NEW YORK The shift of advertising budgets to the Internet is reaching a "tipping point" that will drive Web ad spending to $55 billion worldwide in five years, according to an investment bank.
Piper Jaffray analyst Safa Rashtchy wrote in a research note that advertisers are increasingly mixing their search and brand advertising strategies online. This creates a "virtuous cycle" for the Internet ad market as big advertisers like Absolut Vodka, General Motors and Ford earmark 20 percent of their marketing budgets to Internet marketing.
Rashtchy believes his projection of a 27 percent compound growth rate could prove conservative.
"Online is on its way to a 10 percent share [of ad spending] much faster than we anticipated, and we believe we are now approaching an inflection point when spending growth could accelerate," he wrote.
The demand for Internet ads will likely drive "high single to low double digit" ad price increases in 2006, according to Piper Jaffray.