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Mood hopeful at Internet ad conference

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For Internet advertising executives attending the IAB/Jupiter Advertising Forum in New York last month, there was both good news and bad news about the industry.

The bad news: Internet ad revenue fell to $1.46 billion for the second quarter of 2002, down 21.9% from the same period a year ago and down 20.8% for the first half of the year, according to the "PricewaterhouseCoopers/Internet Advertising Bureau Internet Ad Revenue Report."

The good news: Online ad spending is projected to increase 10% in 2003, according to a report issued by Jupiter Research, a division of Jupitermedia Corp.

About 630 executives from ad agencies and marketing companies attended the show, a significant drop from the more than 1,500 people at the event during the dot-com heyday in 1998 and 1999.

Cautiously upbeat mood

Nevertheless, the mood was cautiously upbeat, even as attendees discussed the challenges facing the online advertising industry in a struggling economy.

"We have a real business here that’s viable for the long term," said Greg Stuart, CEO of the IAB. Pointing to projections from Thomas Weisel Partners, a San Francisco-based merchant bank, Stuart said 71% of the top 24 online ad-supported businesses will be profitable this year, compared with 42% of online ad-supported businesses that reported profitability in the third quarter of 2001.

Stuart said falling Internet ad revenue results in the first half of the year were not surprising, given the weak ad economy.

He also cited industry accomplishments this year: a new branding campaign by the IAB to raise awareness of the effectiveness of Internet advertising, new measurement guidelines, updated terms and conditions for online buying, and research that proves the effectiveness of online advertising.

Event co-sponsor Jupiter echoed Stuart’s optimism. The research company, noting results for the first half of the year were disappointing, expects a turnaround in 2003.

Jupiter projected online ad spending will finish this year at $5.6 billion, compared with $5.5 billion in 2001. And it forecast growth to $6.2 billion in 2003. By 2007, online ad revenue will reach $14 billion, Jupiter predicted.

"The gloom over the advertising economy—both traditional and digital—hasn’t changed much," said Patrick Keane, VP-senior analyst at Jupiter Research.

However, there are a few promising sectors that will help boost online ad growth in 2003, Keane said. These include classified ads and increased Internet spending by traditional advertisers. Industries that will lead online ad spending include automotive, health care and consumer packaged goods, he said.

Samsung embraces Internet

One advertiser that has embraced the Internet as a marketing vehicle is Samsung Electronics, which launched a multi million-dollar integrated campaign in May that included 375 million impressions a month across 110 Web sites. It was the first major Internet advertising effort by the consumer electronics company. The online budget was not disclosed.

"I think the Internet is a great savior for a company like ours, which is launching products 365 days a year," said Peter Weedfald, VP-strategic marketing and new media at Samsung Electronics North America, in his keynote speech at the conference. Samsung’s campaign, with a tagline "DigitAll," was developed by Foote, Cone & Belding, New York.

While online ad revenue has dropped this year, there have been some success stories. TechTarget, for example, reported a 70% increase in revenues in the first half of this year, compared with 2001’s first six months. TechTarget operates 18 niche IT Web sites, produces more than 100 e-mail newsletters and publishes Storage magazine. Other revenue streams include e-mail list rentals, Webcasts and conferences.

And digital marketing agency Avenue A Inc., Seattle, reported revenue of $34.4 million for the third quarter, up 68% from revenue of $20.4 million for the third quarter of 2002. The agency had a net loss of $677,000 for the third quarter, compared with a net loss of $6.6 million for the third quarter last year.

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