Interesting story today from DigiDay on online ad forecasts entitled "Lies Damn Lies, Ad Industry Growth Forecasts"

Jack Marshall - the author points out some of the gross overestimates that are routinely made. It is worth keeping in mind when you hear the huge numbers often thrown around for new media.

Here is a portion of the story:

In March 2008, for example, eMarketer predicted U.S. mobile ad spend would reach $5.2 billion by 2011. By October 2011, however, the company had downgraded those estimates by a whopping $4 billion and, instead, suggested total spend would reach just $1.2 billion that year. In eMarketer’s defense, it probably didn’t foresee the economic difficulties that kicked in later that year, but that fact just helps illustrate the point: It’s impossible to predict the growth of such immature markets.

“There are known knowns and there are also known unknowns,” said eMarketer analyst Noah Elkin, quoting Donald Rumsfeld. “The issue with the unknowns is that there are more of them in an emerging market like mobile compared to relatively more mature markets such as TV or print. As a result it’s always possible some forecasts will be off, but you do your best to predict the future with the knowledge you have today.”

This is all true and a general guard against taking any economic forecast as gospel. After all, imagine all the data sitting in front of the Federal Reserve about the housing market in 2006. The foremost stewards of the U.S. economy saw nothing but growth ahead. Instead, the market lost trillions of dollars in value. Oops.

Online advertising is small potatoes in comparison, yet it’s hard to predict with the accuracy of, say, the TV upfronts. Too many changes from year to year. It is still a young medium. And yet there’s a heavy demand — from journalists, venture capitalists, publishers, agencies and others — for forecasts in the most nascent of industries. In 2007, for example, eMarketer estimated 2011 U.S. video ad spend would reach $4.3 billion. By June 2011, that prediction had been reduced by 50 percent to $2.16 billion. Oops again.

By no means is it just eMarketer’s estimates that appear inaccurate, either. In October 2007 Forrester Research forecasted U.S. video ad spending would reach $7.1 billion by 2012. Last week the company expressed very different views, stating it now expects the market to generate $5.4 billion in revenues in 2016. Might want to check in sometime in 2014 for an update.

full  story here