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2005 Internet Ad Spending Predictions Revised Upward

EMarketer Projects 34% Growth to $12.9 Billion

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NEW YORK ( -- Based on the soaring first-quarter revenues of Google and Yahoo, eMarketer now projects Internet ad spending will grow by 34% this year rather than the 21% it had predicted earlier.

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The market research company estimates at total of $12.9 billion will be spent for online advertising throughout 2005.

Engines of commerce
The report also underscores how powerful Google and Yahoo have become as the leading engines of Internet commerce.

David Hallerman, senior analyst at eMarketer, said Google now accounts for 23% of all online ad spending, while Yahoo controls 21%.

Rich media -- meaning complex animations and video -- is the fastest-growing format of online advertising this year, with a 47% spurt in spending. The rapid increase in consumer installation of broadband connections is credited for the sharp spike. EMarketer predicts 60% of online households will have high-speed access by the end of the year.

Broadband 'always there'
"More than speed, the importance of broadband is its pervasiveness," Mr. Hallerman said. "Like TV or radio, you turn it on and it's always there."

While noting that rich media represents only 11% of the overall online spend, or about $1.4 billion for 2005, he pointed out that the growth is important because it shows advertisers' increasing reliance on the Internet as a branding tool.

Search marketing, the big growth channel among online formats last year at 51%, will level off with a growth this year of 40%, to $5.4 billion. "Search is stabilizing," Mr. Hallerman said. "It's reaching the beginning of being a proven commodity."

Part of the reason for the spending growth is higher keyword costs and the fact that more mainstream marketing companies have figured out how search marketing can be effectively integrated into their overall ad campaigns, he said.

Classifieds up 17%
Two formats that are the old reliables in online advertising are classified ads and static display ads. Classifieds will represent 17% of online ad spending in 2005 with a total of $2.2 billion. And display ads will comprise 18%, which amounts to $2.3 billion.

"They are the bread-and-butter area of online advertising," Mr. Hallerman said.

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