Study: Net Ad Revenues to Top TV Spending by 2005

FRAMINGHAM (03/29/2000) - A new study predicts that more advertising dollars will flow to the Internet than television in the next five years.

The Myers Group, a New York-based economic research firm that has been tracking media spending for the past 20 years, released a report Monday forecasting global Internet advertising to increase from $5.25 billion this year to $45.5 billion in 2005. Declining viewership for major network programming -combined with rapidly expanding Internet markets - were two of the main reasons company President Jack Myers felt comfortable with predicting nearly ninefold growth in Web site advertising.

"We're moving away from mass media to the reality of fragmented media," Myers said.

The report estimates that U.S. online advertising expenditures will increase from $4.32 billion this year to $32.5 billion in 2005. U.S. television ad money will increase from $16.8 billion to $19.2 billion over the same period, according to the Myers report. Myers envisions a $12 billion increase in international online advertising dollars over the next five years, with Germany leading the way among European markets and massive inroads made into China.

"The Internet will really be the first medium that gives direct access to the Chinese market," he said. "The Chinese government will try to control a lot of what gets through, but they can't put a lid on the whole Internet."

A January report from Jupiter Communications Inc., a New York-based market research firm, also forecast significant Internet advertising growth. However, that report set the figure at a much lower $11.5 billion by 2003.

Myers was comfortable with his firm's more aggressive projection.

"We were the most accurate (prognosticator) on cable's growth throughout the '80s and '90s and people thought we were smoking something back then, too," he said.

Traditional advertisers such as automobile makers and entertainment companies are expected to fuel the Internet growth. The Jupiter report found that only 22 percent of advertisers are making "full use of clickstream data."

The Jupiter report also stressed a significant advantage of online advertising - it can reach people during work hours while television relies on people being home and planted on their sofas. Jupiter reported that 42 percent of of consumers said Internet use had cut into their television time.

Both Myers and Jupiter see increased advertising opportunities coming from integrated media. Myers noted that many people will get their cable and Internet feeds over the same wires, which could lead to the blending of those mediums.

The TV Guide Channel and CNN have already dabbled in continuous advertising - a trend that Myers believes is just the tip of the iceberg.

"The technology to deliver all this advertising is coming and it should be here in the next 24 months," he said. "I think we will have a constant stream of advertising that goes hand-in-hand with whatever type of programming or Web site you're on."

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