Online Display Advertising Spend Actually FALLS 2001-2006

I was just reviewing Morgan Stanley’s last Internet Trends report and noticed a very interesting statistic deep down in the text of slide #23:

According to Morgan Stanley research estimates, spending on disply advertising online (those graphical banners, buttons, skyscrapers, etc) actually FELL over the period of 2001 to 2006.  In 2001, total spending on display advertising was $4.42 Billion and 62% of total ad spending.  In 2006, it was only $4.1 billion and 26% of total ad spending.

It’s very rare that you actually see online marketing spend decrease in absolute dollar terms.   Here is a picture of the story:

It’s even more amazing if you think that 2001 was just post-bust, and spending was lower than it had been in 1999, so this would have been an even steeper fall if we compared 1999 to 2006.

Right, so the big question is why?  Here’s my take:  3 reasons:

1. Search actually sells stuff online and a bunch of those 2001 advertisers were actually more interested in selling things than they were just spreading their brand around.  So when search hit the scene, it stole a ton of money from graphical.

2.  Graphical spent the better part of 5 years trying to figure out what metric it should sell to advertisers.  It moved from click through rate to CPA and CPM.   None of them really say much and compare poorly to other advertising media where the brand impact is much easier to understand (like television, for example).

3. The real explosion in online content is user generated (60% of the internet).  Most graphical advertisers don’t understand how reach that content, and the few who do don’t understand how to advertise on it effectively.

It spells opportunity to me…