Jupiter: Online Advertising to Boom

Despite the recent dot-com funeral marches and death rattles, research released Wednesday by Jupiter Communications predicts online advertising revenue will reach $US16.5 billion by 2005, up from $US3.5 billion in 1999.

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Businesses seek a more efficient, accountable approach to marketing, which will drive the growth of online ad spending, Jupiter said. For the past two years, companies were too eager to gain customers, without any regard to the lifetime value of the customers. But that is changing as companies renew focus on accountability and efficiency, as well as use the Internet, a more quantifiable medium, to hawk goods and services, Jupiter said.

Rapid online ad growth also will lead to an explosion of clutter as users receive, within five years, upwards of 950 Internet-based marketing messages per user, per day, Christopher Todd, an analyst with Jupiter's online advertising group, said. That will be more than double the 440 messages per user, per day received in 1999.

Marketers plan to increase Internet advertising spending more than in any other medium, the results of a Jupiter executive survey show. According to Jupiter, 73 percent of advertisers plan to increase their online spending in the next 12 months, as opposed to 43 percent planning to increase magazine spending and 37 percent intent on increasing cable TV budgets. Such growth will hurtle the Internet to fourth place as an advertising medium, for nearly 8 percent of the total U.S. advertising market, surpassed only by broadcast television, radio and newspapers, Jupiter said.

The burgeoning size of the online population, with people spending more time online, and increasing Internet commerce revenues will propel online advertising market growth, despite recent dot-com failures, Jupiter said.

Nearly one-third of online advertising will come from incremental spending, according to Jupiter, but the majority will be culled from traditional advertising budgets. The largest sources of online ad dollars will be from direct marketing budgets, at 20 percent, and newspaper budgets, at 14 percent, in terms of absolute dollars, Jupiter said.

The challenge for online advertising is to capture the eyeballs of the consumers as they slog through those 950-plus impressions each day. Marketers need to use a diverse arsenal of integrated tactics and new models, Todd said.

They will need to communicate a consistent message while mixing and matching e-mail marketing, viral campaigns (jargon for positive word-of-mouth), affiliate networks, sponsorship and banner advertising, according to Jupiter.

Four primary platforms exist for online advertising, Todd said -- the Web, e-mail, instant messaging and wireless. Ads have a variety of placements, such as banner ads at the lower end of the spectrum to streaming media at the higher end on the Internet, to text and HTML (Hypertext Markup Language) embedded in e-mail messages, he added, but "the bottom line is that advertisers need to use (these) opportunities to develop coordinated, mixed campaigns."Jupiter predicted the biggest spenders for online advertising in 2005 will be companies specializing in financial services, automotive, computer hardware and software, travel, consumer packaged goods and media.

"Automotive and consumer packaged goods, which have been slow to embrace online (advertising), will be key and crucial" for the online advertising market, Todd said. Those two categories are expected to spend $US2.1 billion and $US800 million, respectively, on online advertising in 2005.

Jupiter Communications, based in New York, can be reached at +1-212-780-6060 or at http://www.jup.com/.

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