Spending on Internet advertising will grow from $65.2 billion in 2008 to $106.6 billion worldwide in 2011, about 15-20% per year, according to research firm IDC.

“Compared to more mature types of advertising, Internet advertising is growing at a phenomenal rate,” said John Gantz, chief research officer at IDC. “But Internet advertising is still relatively new and growing from a much smaller base. By the end of the forecast period, spending for Internet advertising will trail direct mail – the third largest form of advertising – by more than $30 billion, while spending on TV and print ads will each be nearly twice as great as for online ads.”

Other highlights:

• Keyword ads will remain the dominant type of Internet advertising throughout the forecast period, capturing more than a third of annual online ad spending worldwide.
• Display ads will be the next largest type of Internet advertising, capturing more than 20% of worldwide spending annually through 2011, followed by classified ads with nearly 19% of all online ad spending per year.
• Spending in both categories will be pressured by rich media ads, which are expected to grow at a compound annual growth rate (CAGR) of more than 50% during the 2007-2011 forecast period.

“Marketers already recognize that online advertising must be incorporated into any comprehensive ad strategy. This will continue to drive growth in online ad spending well beyond the forecast period,” said Karsten Weide, program director, Digital Media and Entertainment.

Additional highlights from IDC’s Digital Marketplace Model and Forecast include the following:

• The United States will lead the world in both total advertising spending and online ad spending throughout the forecast period with expenditures of more than $265 billion and $45 billion respectively in 2011.
• Central and Eastern Europe (CEE) and the Middle East and Africa (MEA) will experience the fastest growth in Internet ad spending during the forecast period with a CAGR of 42.1% for CEE and 29.8% for MEA. Online advertising in Asia/Pacific (excluding Japan) will also experience dramatic growth with a 2007-2011 CAGR of 25.4%.
• Internet advertising will make the greatest gains relative to total ad spending in Western Europe, where online ad spending will capture 18.2% of total ad spending in 2011. This compares to a 16.3% share for online ad spending in Japan and 14.6% in the United States.
• More than $5 billion will be spent worldwide in 2008 in each of the top four categories of online ads – adult content and gambling, information, electronics, and computing. These will continue to be the leading categories in 2011.