Of the top 20 Internet ad categories determined by researcher InterMedia Advertising Solutions for the first three quarters of 1998, only one -- medicines -- didn't make the list in 1997.
COMPUTERS, SOFTWARE NO. 1
Computer and software companies -- a category that includes Internet companies -- are the biggest spenders, accounting for $321.6 million, or 47% of all spending in the first nine months of '98. Financial products came in second, placing about $60 million in Internet advertising during the same time period.
Others in the top 10 include direct-response companies, local services, automakers, hotels and resorts, telecommunications and retailers. Combined, the top 10 accounted for more than 87% of all Internet ad spending in the first three quarters.
"The major categories are either technology or service [companies] or are interested in e-commerce," says Joe Philport, president of InterMedia, a unit of Competitive Media Reporting. "For the short term, that fundamentally is it."
InterMedia estimates spending based on banner and sponsorship placement on 300 Web sites. The company does not include advertising placed on America Online.
IAB PAINTS SIMILAR PICTURE
Statistics from the Internet Advertising Bureau paint a similar picture. The top four ad categories in 1998 were consumer (including retail, auto, mail order, toys and travel), computing, financial services and telecommunications. Those categories accounted for 76% of all Internet spending.
Although these spending trends are not surprising, the business is still small enough that the moves of a few advertisers have huge impact. And as e-commerce wends its way through more product categories, there will be more advertising options for products that heretofore weren't big Net ad spenders.
GM, HONDA, TOYOTA LEAD AUTOS
Consider the automotive and auto accessory category, which ranked No. 6, spending $30.4 million in the first three quarters, according to InterMedia. Three companies -- General Motors Corp., Honda Motor Co. and Toyota Motor Sales USA -- accounted for more than half that spending.
GM, in particular, has come on strong as an Internet advertiser, spending $12.7 million in 1998, more than double its 1997 spending. (see GM, Page S2). Much of that spending is going toward promoting its GM BuyPower online car shopping venture.
BATTLE OF THE BOOK SELLERS
In the retail category, which racked up $18.2 million in spending in the first nine months of 1998, barnesandnoble.com alone accounted for $5 million, or 27% of the entire category, as it sought to position itself against rival Amazon.com.
What this means is that there's still plenty of opportunity for an advertiser to enter the market and single-handedly drive growth of an entire category with only a few million dollars in spending.
The rise of e-commerce is affecting ad spending in other ways. The past year saw a huge rise in online investing. Simultaneously, Datek Securities, Fidelity Investments, American Century, Wells Fargo & Co., Quick & Reilly and E*Trade all more than doubled their measured spending in the first nine months of 1998, compared with the same period in 1997. Ameritrade's spending rose a whopping 4,253%, to $2.1 million in the period.
ONLINE PHARMACIES SPARK '99
A similar scenario may play out this year in cosmetics, prescription and over-the-counter drugs, and personal hygiene products. Those categories combined accounted for about $12 million in Internet advertising in the first nine months of 1998. This year's launch of Drugstore.com as well as other online pharmacies open new avenues of promotion for marketers that previously didn't exist.
"There's going to be a need for merchandising" in this e-commerce category, as well as in similar businesses such as online grocery stores, says Sharon Katz, group media director at Modem Media-Poppe Tyson, Westport, Conn., which handles Internet advertising for Unilever's Mentadent.
The challenge, she says, will be figuring out "how you replicate the endcap"