During the first of day of the Jupiter Online Advertising Forum in New York yesterday, the organizing company, Jupiter Media Metrix, revealed a rosy forecast for the future – online ad spending in the
U.S. will rebound.
According to the new forecast, while online ad spending in the U.S. will increase only 5% in 2001, it will rebound and grow at a compound rate of 22% over the next five years -
reaching a total of over 15 billion dollars by 2006.
However, spending on digital marketing initiatives such as coupons, promotions and e-mail will surpass that of advertising and reach over 19
billion dollars during the same time period. Jupiter analysts have found that Web publishers must diversify advertising opportunities or they risk losing money to these other online marketing
initiatives.
“Marketers' inability to evaluate online advertising effectively has lead to the current hiccup in spending,” said Marissa Gluck, senior analyst for Jupiter Media Metrix. “Online
advertising, when fully measured, remains a strong impetus of consumer action -- including increasing traffic and sales, inspiring loyalty and promoting referrals. While reduced financial resources is
still a key factor inhibiting the growth of online advertising, the primary online advertising industry stimuli are still around and will be.”
According to the Jupiter Internet Advertising Model,
online advertising will account for 7% of the total advertising market in 2006- up from 3% in 2001. As the Web audience continues to grow, marketers will follow the eyeballs. Jupiter analysts identify
the following factors as catalysts for growth in consumer eyeballs to the Internet: increasing use of consumer Internet services; technology improvements that result in more fulfilling online user
experiences; increasing number of online 'veterans'; and Internet-driven business cost savings. These consumer-driven trends will be the primary drivers of traditional brand advertisers to the Web.
Additionally, the report says that traditional advertisers present the greatest opportunity to struggling ad sellers. Jupiter analysts have found that many of the largest offline ad spenders,
particularly those that sell high consideration, information-intensive products, will also make up the bulk of online spending in the next five years. The Jupiter Internet Advertising Model shows that
financial services companies will account for the most online ad spending by 2006 - a total of 2.1 billion dollars.
Automotive and media companies will be the next largest online ad spenders,
accounting for two billion and 1.6 billion dollars, respectively.
Notably, pay-per-performance advertising will experience only slow growth over the next five years. The Jupiter Internet
Advertising Model shows that pay-per-performance spending will account for just 22% of all online ad spending in 2001 and will only increase to 30% by 2006. Jupiter analysts warn that the
cost-per-thousand impressions (CPM) model is not dead and advise that the misuse of pay-per-performance will result in its return as publishers fail to meet advertiser demand.
“Currently, the
online advertising industry is more mature than digital marketing initiatives such as sweepstakes, coupons and promotions,” Gluck said. “However, as marketers demand a greater impact from their online
investment, publishers risk losing dollars to marketing initiatives that don't require their involvement, such as online contests, movies and games. Publishers must find ways to diversify their
offerings to become more appealing to advertisers and should explore types of integrated relationships that focus on product and consumer rewards.”