• by Dale Chaney , June 17, 2002

The Internet has caused us to redefine many words, terms, and concepts—and one of them is “slump,” especially as it refers to online ad spending. By the most conservative estimate (see chart), online ad spending is forecast to rise 33 percent in 2001, and, by the most optimistic, 62 percent. It doesn’t sound like much of a “slump.”

At this point, the question isn’t about judging the accuracy of anyone’s methodology—because online ad spending has for several straight years flummoxed even the most scientifically precise forecasters—but more where forecasters collectively see the growth coming from. For 2001, forecasters universally see offline advertisers funneling money onto the Net. The reason, they say, is that online advertising is becoming part of integrated marketing strategies.

The effect is significant. Jupiter Communications, for example, sees a steady increase in online’s share of total ad spending, rising from 2 percent in 1999 to 3 in 2000 and 4 in 2001. They see this 1 percent annual increase continuing through 2005, at least.

Forrester and Zenith Media believe the online increase will take mostly from TV and print budgets. A big reason, says Zenith’s North American CEO Rich Hamilton, “is that advertising clients today have multiple sales and distribution channels that include the Internet. They need to expand advertising channels to match.”

And because of this expansion in sales and advertising channels, Hamilton suggests that thinking in terms of the catch-phrase “dot-coms” and their possible impact on online ad spending may be insufficient if not invalid. Indeed, most forecasters are suggesting that pure-plays may be doing more spending offline than on in coming years. In 1999, according to eMarketer, so-called dot-coms did 63 percent of their ad spending offline and this number will grow to 74 percent by 2004.

However, remember that we are dealing with matters of scale here. Even at its heftiest, online advertising accounts for less than 10 percent of the overall ad market, so even when it reaches the $10-$20 billion range, it’s not exactly taking over the advertising world. Rather, it is becoming a steady part of it, forecasters say.

Then there’s the matter of where the money is actually coming from. First there’s a rapidly growing number of new traditional advertisers. For example, more than 2,300 retailers advertised online in October 2000, about four times the number from October 1999—but most, in the words of one executive, “are really doing the equivalent of sticking their baby toe in the water.” The dollars, he says, are really coming from maybe 100 very large advertisers who are spending more and more.

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