'Really booming' Net grabs $3.6 billion

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Estimated online ad spending in the U.S. more than doubled in 1999 to $3.6 billion, up from $1.7 billion in 1998, according to Internet data aggregator eMarketer in its June "eAdvertising Report," released on June 5.

That's a growth rate of 116%. While the growth rate will slow as the industry stabilizes and matures, the report estimates that U.S. online ad spending should hit $6.1 billion this year and $21 billion by 2004.

Online also will increase its share of the total ad pie, the report projected. Online's portion of 2.5% of $243 billion in total ad spending this year is projected to rise to 7.6% of the $277 billion projected in 2004.

"That tells me this thing is really booming," said the report's author, David Halprin. "Internet advertising really is something that potentially will be more effective advertising than anything the world has ever known. You can potentially aggregate an unparalleled amount of information on each individual person and use that to create profiles, and then target your ad so that theoretically the person will always be seeing an ad that is completely relevant to whatever that person is interested in at that moment."


Another reason for the online ad spending boom, Mr. Halprin said, is that "for the first time, you can get the advertising and the transaction in the same channel. . . . That's a huge change."

EMarketer does not conduct original research, but compiles research studies, reports and surveys from published, publicly available resources such as Forrester Research, Jupiter Communications, Lazard Freres, Myers Group and Yankee Group. Then it presents its own analysis of the data.

EMarketer found that many major research consultancies have recast their ad revenue projections upwards. Composite 1999 online ad revenue projections from about 15 researchers, for example, were $2.6 billion in January 1999, $3.1 billion in December 1999 and $3.6 billion this April, according to eMarketer.

Overall comparative estimates of U.S. Web ad spending projected through 2004 continue to vary radically among the research consultancies. The discrepancies result from a lack of a hard and fast measurement instrument for online advertising, Mr. Halprin said.

"There are a lot of industry groups working on this," he said. "The Internet is still in its infancy. In other media, there have been 50, 100, 200 years that people have been working this out. And because the Internet is a new medium, the numbers get really scrutinized."


Some research groups estimate ad spending based on rate-card information and others estimate it based on discounted rates. While some organizations count barter as revenue, others do not.

EMarketer found seven barriers to online advertising still exist, including bandwidth problems that limit creative options; a fragmented online audience; and relatively weak branding via the Internet medium.

In addition, Mr. Halprin said, consumers' average daily Internet use is only about 26 minutes compared with four hours TV viewing.

Despite online advertising's tremendous growth, "you still have to keep the perspective that it still is a small thing," Mr. Halprin said.

Among the report's other findings: While U.S. online ad spending is expected to grow 69% this year compared to 1999, ad spending on cable TV is expected to grow 23%; outdoor is expected to grow 20%; radio, 10%; magazines, 8%; broadcast TV, 7%; newspapers, 5%; direct mail, 3%; other, 3%; and Yellow Pages, 2%. Despite online ads' sharp rise, total dollars spent in 1999 surpassed only outdoor advertising, according to the report.

Globally, the U.S. still dominates in terms of total online ad spending: The country accounts for about half of worldwide online ad spending and will continue to do so through 2004, the report found. The rate of growth in Asia, Europe and other parts of the world is and will continue to be higher because the rest of the world is at an earlier stage in terms of online advertising, Mr. Halprin said.

Copyright June 2000, Crain Communications Inc.

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