Report: Israelis' Web Usage Is High, but Online Ad Income Is Low

At $40 per capita, Israel is lower than the world average, first-time report on market funds.

By Maya Epstein

Israelis spend a lot of time online - similar to usage rates in other countries in the West - but despite the huge potential, online advertising revenues are low, according to a report on trends in Internet usage.

"As a tiny country located within the vast Middle East and Africa region, metrics on Israel's internet tendencies and ad spending can get lost amid depressed regional statistics," says the report published by the international research company eMarketer.

"But Israel actually shows levels of internet penetration and engagement much more in line with mature markets in North America and Europe. With its strong economy, growing high-tech sector and close ties to the US, it's a country where publishers and advertisers are likely to find a highly engaged, and receptive, audience."

Israel leads region

According to July data from the International Telecommunication Union, 70% of Israelis had Internet in 2011 - close to eMarketer's estimate of a 74% user penetration rate in the United States.

By comparison, the Middle East and Africa had a regional Internet penetration of 13.6% the same year.

eMarketer cited data from a 2011 survey by Google and market research firm Shiluv Millward Brown, which reported that Israelis spend more time on the Internet than watching television.

Some 49% of the time that Israelis spend on media is devoted to the Internet, of which 38% is on desktop computers, 3% on tablets and 8% on cell-phone Internet. By comparison, only 29% of Israelis' media time is spent on television, 13% on the radio and 9% on print media.

In addition, according to the comScore World Metrix, the typical Israeli spends about 10 hours monthly on social networks like Facebook.

But eMarketer claims that, in comparison to its immense potential, expenditure on online advertising is low in Israel.

According to the company, the 2011 expenditures on Internet advertising reached about $213 million, or NIS 809 million. That amounts to about $40 per user - below the world average of $43. eMarketer cites the low level of expenditure as an advantage for advertisers who wish to enter the Israeli market, as they can benefit from low prices. But for Israeli content providers, this represents unrealized potential - and less money flowing into their pockets.

Ad spending: NIS 573m

According to data from the Israeli Marketing Association and Yifat Barkat Advertising, expenditures on Web advertising were even lower - about NIS 573 million - but this figure does not include advertising on online forums, which represent a major focus for Israelis.

Ken Granot, vice-chairman at the research firm Zenith Optimedia Israel, claims that the situation of online advertising in Israel is, in fact, good.

"The average ratio of online advertising to total advertising in Western Europe is 20%. In Europe it's 19%.," he said.

Israel is in good spot

"We're in a good spot in the middle, but in an era of shrinking media pie, advertisers prefer to stay in a familiar and safe place. Another phenomenon is a transition to results-based advertising, like Google and Facebook, which are cheaper. It appears that the advertising inventory of Israeli sites has not been fully realized."

Granot notes that most of the advertising money that is switching to the Internet is coming from newspapers - not from television, which is maintaining stability.

Accordingly, video advertising on the Internet is the primary growth engine for online advertising, since it can serve as an alternative to television advertising.

Tomer Neuberg / Jini