According to the new Jupiter Research forecast, set to be unveiled this morning at the Jupiter Media Advertising Forum, marketers will spend $8.4 billion on online advertising this year, growing a massive 45 percent over the next three years to $13.8 billion by 2007, and then $15 billion by 2008. Magazine spending will rise at a more modest rate, from $12.2 billion in 2004 to $13.8 billion in 2007, and finally $14.5 billion in 2008.

Across other media, Jupiter forecasts Yellow Pages spending to hit $17.5 billion, and radio to hit $26.5 billion by 2009.

Jupiter Research analyst Niki Scevak said online advertising will continue its rapid growth pattern as it becomes more performance-driven, to the benefit of publishers, advertisers, and their clients.

"There is strong growth in the pricing of advertising," Scevak said. He cited paid search as the key driver of performance advertising, and noted that the trend is now spreading to other online ad platforms. "We've seen the CPM beaten down; price-effectiveness is now measured on a direct sales basis. That translates into calculatable ROI."

Scevak said that the proliferation Web analytics platforms play a key role in this. "Once [advertisers] know the measurement framework, they're willing to spend more."

Carat Interactive executive vice president, creative and technology, Karim Sanjabi adds that analytics will be crucial to the increased migration of ad dollars online. Citing Carat's recent win of Proctor & Gamble's coveted account, Sanjabi says that analytics played a "fundamental" role in driving the advertising giant toward the shop's communications planning division. He says that several of Carat's TV clients have also expressed interest in cross media initiatives involving the Web.

The online industry, he said-which got itself into trouble with empty promises in the past-is finally reaching the point of accountability through the development of Web analytics.

According to Sanjabi, the "serious marketers" have put dollars back into the Internet now that the economy has picked up. "The top 100 advertisers are all taking the Internet very seriously," he said. Based on Carat's own growth projections, Sanjabi said that "in the short term the [Jupiter Research] numbers feel good." He said that Carat's interactive unit sees growth across virtually all of its services, especially search, media and creative, affiliate marketing, and Web development services. . Both Scevak and Sanjabi noted that the Internet is starting to feature in the plans of large brand advertisers. "At the top end, we're seeing renewed confidence, [advertisers are] using the Internet as a branding medium, integrating it in the media mix," said Jupiter's Scevak. Sanjabi highlighted the success of a recent creative developed by Carat Interactive for Adidas. He said the feedback Carat received from consumers for the spot, which is still running on MSN and Yahoo!, was 99 percent positive.

According to Jupiter Research, in 2003 users spent 62 percent of their time online at Google, America Online, Yahoo!, or MSN. These properties also accounted for 51 percent of the overall Internet ad spending in 2003. Sanjabi said that advertisers will continue to allocate dollars to these massive Web properties, but the adoption of newer technologies, like contextual marketing and behavioral targeting will enable marketers to vary their spending on granular, specialized audience segments.

This news story is important. I recommend that everyone read it.