Online Ad Spending to Lead the Way in Total Media Rise for 2003

Are advertisers finally beginning to loosen their ad budget belts?

eMarketer’s Media Spend Outlook 2003 report answers a timid “yes.” The just-released paper, gleaned from eMarketer’s larger Interactive Marketing report, forecasts a total media growth rate in ad spending of 4.7% in 2003, and an even rosier rate of 6.3% growth for online media spending next year.

“It’s not going to be a huge tidal wave,” cautions eMarketer CEO, Geoffrey Ramsey, “….But if total media is rebounding because of the economy, there will be a bigger pie, so the slices will grow along with it.”

Just about all the portions will be super-sized in the coming year, although moderately so, according to the report which aggregates data from PricewaterhouseCoopers, Myers Group, Kagan World Media, Forrester, Jupiter, Veronis Suhler and several other research firms. In 2003, Television ad spending will expand anywhere from 1% to 10%, “steady growth” for Radio comes in at between 3% and 6.3%, and newspaper ad dollars could increase up to 6.4%. The report also predicts that, despite plunges in 2002 ad spending, the magazine sector could see a 2% to 6% boost next year. More slow but steady growth is shown in 2003 for Direct Marketing (around 4%), Yellow Pages (from 1% to 5%), and Outdoor (between 1% and 4%).

The good news is really for online media. Ad spending on the Internet will expand from $6.3 billion this year to $6.70 billion in 2003, and will hit $8.1 billion in 2005, comprising 2.8% of total US media expenditures that year, according to eMarketer.

The reasons for the online ad augmentation are many; however, nothing is more instrumental than the move towards media integration by advertisers. For more and more traditional advertisers, the Web is no longer an afterthought, but an elemental component of the overall media mix. This represents a ”transformation of people’s minds,” says Ramsey.

Also playing significant roles are efforts by industry groups such as The Interactive Advertising Bureau and the Online Publisher’s Association to promote education and standardization of online ad formats. Larry Kramer, chairman and CEO at CBS Marketwatch.com asserts that education is “a major aspect of what’s happening. Interactive brand managers have been fighting an uphill battle to explain the value of the Web internally.” According to Kramer, through research such as the IAB’s Cross Media studies, marketers are learning that the Internet “doesn’t replace other forms of media, but enhances them.”

Signs of an upturn in ad spending are in sight for the financial news outlet, which has seen beefier contract renewals from financial services companies of late, as well as renewed interest from post-bubble no-shows in the tech sector. Other major online publishers have experienced ad revenue increases this year including New York Times Digital, Microsoft’s MSN, Washingtonpost.com and Yahoo.

The growth of broadband users, representing 61.3% of the entire US population by 2004 according to the report, has also spurred more online spending. Not only do broadband users spend more time online as compared to dial-up users (a lot of it during those tough-to-reach daytime, at-work hours); they make rich media advertising, which can bring in CPMs of $30 to $40 as opposed to standard banner CPMs of $1 to $4, worthwhile for advertisers.

The eMarketer report also notes the success of online classifieds and the rush towards search engine pay-for-placement advertising as significant factors in the prognosticated Internet ad spending boost.

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