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Since the closing years of the '70s, communications and marketing professionals have been wondering what would happen when the new electronic media apparitions finally began to emerge from just below the horizon.

There were Qube, Videotex and Viewdata. DBS (direct broadcast satellite), videotape, videodiscs and a number of potential computerized technological possibilities. Now comes the next stage in the "technological evolution": the Internet.

The Internet has come into clear view and it's evolving into an organism that will have great impact. It is changing consumer behavior and marketing concepts as we've understood them for decades.

As we approach the millennium, it is a good time to attempt to put in place initial benchmark facts -- to help track developments into the next century. However, it's a lot more difficult than it appears to be to try and quantify the new medium in terms of ad spending, since available information is not clear and distinct.


There's little doubt the Internet rapidly is becoming a significant medium for the distribution of information and for many commercial transactions. Still unclear is whether the Internet is really an effective medium for the distribution of advertising.

The traditional and long accepted meaning of advertising is: "Advertising is mass persuasion by means of the non-personal communication of a sales message through media time and space that are paid for."

The classic definition indicates many other marketing communications activities are not legitimately included in the advertising function. Some of the excluded items are personal selling, retail slotting allowances and display allowances, "push" money, contests, free goods, in-store demonstrations and many of the regular expenses associated with the operation of a retail outlet or other place of business.

Some reports of Internet ad revenues include items not properly counted as true advertising costs.

Estimates of Internet advertising for 1997 have varied greatly. Jupiter Communications puts it at $940 million; the Internet Advertising Bureau at $906 million;

eStats at $650 million; Yankee Group at $630 million; Cowles/Simba at $607 million; CMRInterwatch at $545 million; Forrester Research at $500 million; and ActivMedia at $400 million.

Most of these estimates were derived from information provided by self-interested sources and, without some objective corroboration, they would be considered juridically valueless.


The best we can do is use a judgment estimate somewhere in the range of reality. For 1997, we have selected $600 million as the point to begin our trending reports. The 1998 estimate is projected forward on the basis of the indication of the change from 1997 to 1998.

From the best evidence available to us now, Internet advertising increased by about 75% in 1998 compared with '97, for a projected 1998 figure of $1.05 billion.

Our estimates are subject to considerable limitation, but we hope they'll serve to provide some evidence of the developing trend for this new medium, which presently accounts for significantly less than 1% of all U.S. advertising.

Internet advertising undoubtedly will grow again at a high double-digit pace this year, but it will probably not account for more than 1% of all U.S. advertising until sometime in the next century.

In order to break out a number for the Internet, it has been necessary to make some changes in previously reported data for 1997. In theory, when we originally reported the final 1997 ad expenditures (AA, May 18), the miscellaneous category accounted for Internet revenues -- as well as a number of other items that couldn't be pinned down precisely. For that reason, in making all 1997 changes, we have maintained the totals previously reported while accommodating all other changes within the miscellaneous categories.

As we go forward, we will try to monitor the trends in Internet advertising while watching for any related changes in other media. Instead of grouping all TV together, as we had in the past, we will now have separate totals for broadcast TV and cable TV. A semantic change also involves changing the name of the outdoor medium to billboards.


A year ago, we expected U.S. advertising to outpace the economy and reach $200 billion in 1998. Last year's final ad numbers add up to $201,594,000,000, and ad growth of 7.5% significantly outpaced the nominal gross domestic product growth of 4.9%.

The broadcast TV sector managed to post ad revenue growth in '98 that was a little larger than the growth in the economy, despite a continued slide in TV audience levels. Those gains, however, were greatly helped by the Winter Olympics and the extra political advertising brought about by the fact that all members of the U.S. House of Representatives and a third of the Senate ran for election last year.


The truly large double-digit ad gains for the year were posted by cable TV and radio, as they increased their share of total advertising at the expense of broadcast TV -- an exceptional occurrence in an Olympics year.

Sluggish, below-average growth was recorded by Yellow Pages and the business press sectors, while all the other media sectors performed close to the overall rate of the total for all U.S. advertising.

For the first time, this ad report covers the Internet, with its exceptional double-digit increase in '98.

Looking back on the results can help provide some insights into what may lie ahead for 1999. The Winter Olympics and primary-election advertising helped to produce a large spurt in broadcast TV spending in the opening quarter of '98. This extra bulge wasn't present this year, however, and broadcast TV ratings also have continued to fall.


So the first-quarter comparisons for this year are quite dismal for broadcast TV. Some improvement should occur in the remaining quarters, but broadcast TV ad growth in 1999 will fall far short of last year's relatively good performance.

On the other hand, the momentum in ad expansion in cable and radio should continue, as long as the economy and consumer spending continue to be good.

In 1998, print received very little in the way of extra spending from the elections and the Olympics, so the absence of these events will have little effect on print -- other than not being a potential drain on traditional programs.

Newspaper and magazine ad growth should match or possibly slightly outpace nominal GDP growth, which now looks like it could be up close to 5% for 1999.

Mail advertising has enjoyed better-than-average growth throughout most years in this decade. The number of pieces of mail containing advertising has grown, and in 1998, when personal consumption expenditures rose 5%, spending on direct mail increased 7.4%.


But there are signs these strong recent trends may be in for a pause -- or at least a moderation in the rate of growth.

It wasn't a good year for business publications, mainly because of a severe decline in spending in the medium by computer marketers, which continued to increase sharply their outlays for Internet activities.

Internet advertising's momentum has mainly been supplied by the computer makers and software suppliers.

But the medium won't be a significant contributor to total advertising until the marketers of consumer goods and services find a way to use the medium effectively and importantly.

An interesting side point is that the traditional media are being stimulated by the growth in Internet commerce, with traditional advertising being used by many Internet marketers to call attention to their services and their locations on the Web.

The overall outlook for total U.S. advertising is relatively good for 1999, though not as good as it was a year ago. However, if the economic climate remains favorable with more of the same continuing to be likely for the year 2000, then the advertising industry is poised for exceptional growth next year.

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