Research Behind the Numbers: Ad Projections

by Dale Chaney, Jun 21, 2002, 12:00 AM

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Online revenue will rise to $22 billion—wait, make that $33 billion. In June, Jupiter Communications predicted that worldwide online advertising revenues would reach over $22 billion by 2004. Cambridge, MA-based Forrester Research is forecasting $33 billion by 2004. These projections come on top of actual spending levels reported by the Internet Advertising Bureau, which pegs revenues for 1999 at $4.6 billion, and AdZone Interactive, which has reported a steady month-to-month rise for 2000 to $1.26 billion for the month of June alone.

The forecasts are optimistic—to say the least—and they vary widely. (The disparities can be explained by differences in definitions and methodologies, the way in which respondents to surveys embellish or exaggerate—and, in some cases, lots of guesswork on the part of the researchers.) But, given the well-publicized concern over dot-com web advertising, what is driving the projections—and actual revenues—upward? Experts and analysts see several factors.

One is the assumption that online traffic—new users and volume of page views—will continue to increase. Jupiter sees the worldwide online population more than tripling in the next five years, from 200 million users today to 600 million users in 2005. From Forrester’s perspective, the U.S. online audience alone will grow from 39 million households in 1999 to 60 million households in 2003. In addition, high-speed broadband access, which they believe will increase page views per visit, is expected to reach 22 million households by 2003. Their conclusion: more users—and more merchandising moments that arise from increased online usage—will draw marketing dollars to the wF,A0D

In addition, Internet marketing technologies continue to advance. Products like DoubleClick’s Closed Loop Marketing and Wink’s interactive TV technology—and a host of others—are enabling marketers to track user behavior after they have clicked on a particular ad. Measuring marketing ROI on the web improves the accountability and efficiency of online advertising, enticing more dollars from other media.

Jupiter sees about 6% of all global ad revenue going to the web in 2004. Forrester puts the percentage at about 8.1% in 2005. The online spending will siphon funds from newspapers, direct mail and magazines. And, according to Jupiter, funds will also come from non-advertising marketing sources. The big shift, however, is projected to come as older, traditional companies, such as General Motors, invest heavily to establish their online ad campaigns—old established companies investing in the new economy.

E-commerce, too, will continue to accelerate. Consumer online spending will reach $108 billion in the U.S. by 2003, according to another Forrester report. As retailers establish online stores, they want to reach users. eMarketer says the number of sites and networks seeking advertising has reached nearly 8,000. Other web research firms see the number continuing to climb steeply.

All these projections look forward to increased page views, ad inventory, and tracking ability—and that adds up to good news for media buyers and planners.

Freelance writer Dale Chaney can be reached at Dale_Chaney@msn.com.

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