• by December 28, 2000

Survival of the Weakest?

A recent article in eMarketer by David Halprin, Sr. Market Analyst at eMarketer, discusses the impact of advertising dollars spent Online on traditional advertising media. While the growth "rate" of Online advertising has been in the triple-digits, actual growth of web advertising as a percentage of total advertising will go from 1.6% in 1999 to over 10% in 2005.

Halprin says that reviewing forecasts for advertising spending across all media provides a foundation for a discussion on whether or not the web will cannibalize traditional media. Web advertising grew 116% in 1999, but will grow "only" 97% in 2000. While the rate of growth will slow down over the next several years, it will still be 46% in 2001 by 2005 the growth rate will shrink to 23%. Over the period 1997 to 2005, this represents average annual growth of 67%.

U.S. Online ad spending (in millions)

 +------+----------+----------+
 |
Year | Spending |   % of   |
 |      |          | previous |
 +------+----------+----------+
 | 1996 |     $175 |          |
 | 1997 |      650 |   271%   |
 | 1998 |    1,667 |   156
|
 | 1999 |    3,660 |   116    |
 | 2000 |    7,100 |    97    |
 | 2001 |   10,400 |    46    |
 | 2002 |   15,000 |    44    |
 | 2003 |   19,000 |    27    |
 | 2004 |   24,300 |
28    |
 | 2005 |   30,000 |    23    |
 +------+----------+----------+

source: emarketer

Recent increases in the rate of growth of traditional advertising are projected to slow down to about 2% from 2000 onward.

Looking forward, web advertising will grow at over 44% -- ten times faster than traditional advertising’s 4.2% average annual growth rate—and will continue to dwarf advertising growth rates in general. Web advertising as a % of total media advertising spending

 +------+----------+
 | Year |   Web
|
 |      | Spending |
 |      |    %     |
 +------+----------+
 | 1999 |   1.6%   |
 | 2000 |   2.9    |
 | 2001 |   4.1    |
 | 2002 |   5.7    |
 | 2003 |   7.1    |
 |
2004 |   8.7    |
 | 2005 |   10.3   |
 +------+----------+

source: emarketer

While online advertising grows at an average annual rate of 44%, newspapers, yellow pages, and direct mail each suffers a negative growth rate. Cable TV will grow at better than 21%. Advertising Average Annual Growth Rates 2000-2005

+---------------+-----------+
 | Medium        | Growth %  |
 +---------------+-----------+
 | Online        |   44.3    |
 | Cable TV      |   21.3    |
 | Outdoor       |   20.8
|
 | Magazines     |    5.6    |
 | Radio         |    4.4    |
 | Broadcast TV  |    3.1    |
 | Other         |    0.8    |
 | Newspapers    |   -0.4    |
 | Yellow Pages  |   -1.0
|
 | Direct Mail   |   -