• by Ross Fadner , August 10, 2004

Online stats aggregator eMarketer issued a bullish online ad spending report Tuesday, predicting 2004 spending will rise to $9.1 billion--surpassing the previous online spending high of $8.1 billion set in 2000, and a previous forecast of $8.4 billion set by Jupiter Research just two weeks ago.

The $9.1 billion figure also represents 25.2 percent growth over 2003--a trend that eMarketer Senior Analyst David Hallerman said will continue for several years. For 2005, eMarketer predicts 23.1 percent growth in online spending, and 20.5 percent growth in 2006--solid growth the likes of which hasn't been seen since the early days of TV and radio, according to Hallerman. He added that it took cable nine years to reach 20 percent growth.

The eMarketer report is a hefty $700 million bigger than Jupiter Research's online spending figures, released a few weeks ago. "Even with a slight decrease this last quarter, and mild increases for the rest of the year, the figure comes out to $9.1 billion," Hallerman said.

Online spending for the first quarter of 2004, according to the IAB/PricewaterhouseCoopers Internet Advertising Report, was $2.27 billion. eMarketer reported that second-quarter spending fell to $2.2 billion, but projected "mild increases" to boost third-quarter spending to a record-setting $2.3 billion, and fourth-quarter spending to another record-setting $2.35 billion.

The report also shows that paid search, despite recent hiccups--including a MarketingSherpa survey that said most marketers believe their search campaigns achieve only modest returns--is still the medium's number one driver. Search will comprise 39.5 percent of online spending in 2004--up 3 percent from 2003. Classifieds and display advertising will each make up 16 percent of 2004 spending, and rich media, rising two percentage points from 2003, will make up 10.5 percent.

Hallerman remarked that broadband proliferation fosters all Internet advertising growth, particularly rich media: "The audience is more 'there' than ever, and that aspect of it is key." He said that broadband and streaming video will be driven initially by repurposed TV ads, as "online creative will need room for growth."

eMarketer says that rich and streaming media growth will be more robust than all other online marketing channels this year. Spending will be just shy of a billion dollars--at $955 million, a 64.4 percent growth margin. Jupiter Research also projected $1 billion in rich media spending for the year, which it says will grow at a compounded annual rate of 40 percent over 5 years.

According to Jupiter Research Analyst Nate Elliott, the real "out year" for rich media growth won't be until 2009, when the rich and streaming spend hits $3.8 billion. Elliott noted several platform complications that currently hinder its widespread growth. Different platforms use different technologies, and Web publishers can't accommodate all the different rich media offerings out there.

Elliott said that DART Motif, the year-old rich media platform of ad serving giant DoubleClick, is a good example of this, because America Online is the only one of the big three Internet service providers (AOL, Yahoo!, MSN) that accepts the format--and even AOL's acceptance is only "partial" at that. Elliott says that Motif is "a great idea" that "makes a ton of sense" for advertisers, but it can only become a great product if it's also accepted by Yahoo and MSN.