• by Masha Geller , April 30, 2002

Despite its own obscure future, Jupiter Media Metrix is optimistic about the future of the online ad industry as a whole. The company today released a report predicting that online classified ads will grow faster than any other form of online advertising this year in the U.S., with spending projected to increase from $1.2 billion in 2002 to $2.3 billion by 2007.

According to the report, the strong performance of online classifieds in the overall weak market is due, in large part, to an increasing shift of offline revenues online. Jupiter’s senior analyst Marissa Gluck said that while the offline classifieds market contracted by more than 15% in 2001, online classifieds registered impressive growth, increasing 38% to more than $1 billion.

Jupiter analysts also forecast that overall online advertising spending in the U.S. will grow from $6.2 billion in 2002 to $15.9 billion in 2007, representing a compound annual growth rate of 21% over the next five years. Ultimately, online advertising will account for 7% of the offline ad market spending in the U.S. in the same period, JMM says.

Jupiter is also predicting that despite an expected drop in effective CPM rates between $2.60 in 2001 to $2.50 in 2002, the combination of media consolidation and clutter reduction will result in fewer available ad impressions, eventually creating greater equilibrium between supply and demand, and raising the average CPM. By 2007, Jupiter analysts project that the average effective CPM rate will be $4.18.

"Although spending on online advertising was virtually flat between 2000 and 2001, it is faring slightly better than offline. In fact, only cable fared better than the Internet, which actually bodes well for the Web as it increasingly adopts the niche-orientation of cable TV," Gluck said.

Let’s just hope their crystal ball is working properly this time around.