Online ads down but not out

If you thought all those dotcom deaths were going to reduce the number of annoying ads you see on the sites you visit, you're only partly right. A new report from Cambridge, Mass.-based Forrester Research Inc. indicates that the current drop-off of online advertising is only a lull. The real storm will arrive starting about two years from now.

The report, "Online Advertising Eclipsed," states that interviews with online advertisers indicate not a decline in spending for Internet marketing but an increase. The average spending per company is predicted to rise from US$550,000 this year to $1 million in 2003. And that money is going to come from budgets currently aimed at offline channels, such as print and television.

And the spending won't stop there. The report goes on to predict that online marketing of all types--Web, wireless, interactive TV and more--will grow from $11 billion in 2000 to $63 billion in 2005--12 percent of all marketing dollars spent.

According to the report, low click-through rates haven't discouraged advertisers. The poor results have forced them to reevaluate how they perform online marketing campaigns. Instead of using short-term advertising campaigns, marketers will shift slightly to focus more on e-mail and affiliate programs (where sites with similar demographics trade links to each other), the report says.

Low click-throughs are also making marketers push hard for performance-based payment schemes. According to the report, by 2003, more than 80 percent of online marketing dollars will be based on cost-per-action or a combination of performance and cost-per-thousand impressions (CPM) pricing.

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