Goldman Sachs Predicts $12.3 Billion Online Ad Market In '05

Goldman Sachs has joined the ranks of online marketing observers predicting a bullish year in 2005. In its third annual Internet usage study, released this week, the financial firm said that 2005 could be the "breakout year" for online advertising, and that the market would increase by 28 percent to reach $12.3 billion.

The report, based on 2,000 surveys fielded by Synovate, also predicts that online advertising could account for as much as 7 percent of total ad spending by 2009--up from between 4 and 5 percent last year--and that search will represent more than 50 percent of all online ad dollars. "Top 200 advertisers have transitioned from testing online advertising to making it a permanent component of their marketing mix," stated the report.

The Goldman Sachs numbers differ slightly from other recent forecasts. For instance, earlier this month, Forrester Research predicted that online advertising would reach $14.7 billion this year--23 percent more than Forrester's estimate for 2004 estimates. Research firm eMarketer predicted a total online advertising market of $12.9 billion this year--a 34 percent increase over eMarketer's 2004 estimate.

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Goldman Sachs also estimated that 59 percent of homes with Internet access will have broadband connections this year--up from 50 percent in 2004. In addition, the financial services company predicted that time spent online consuming media grew to 20 percent--up from 16 percent the year before.

Separately, Pacific Crest Securities stated Thursday that it estimated online advertising increased between the high-20 percent and 30 percent range in the first quarter, and will increase by at least as much in the second quarter, based on its media buyer survey. Pacific Crest also forecast that display ad revenue likely will rise between 25 and 30 percent in the second quarter.

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