Forrester Predicts Online Ad Boom
Internet advertising will continue to grow, eventually outpacing direct mail and other media, according to a report by Forrester Research Inc., Cambridge, MA.
Global spending for online ads will reach $33 billion by 2004, one-third of which will be spent outside the United States, Forrester predicts. The increase will come from several sources, including the reallocation of roughly $27 million – 10% of all U.S. ad spending – from traditional media.
This shift will occur through a combination of direct transfers of dollars, downard pressure on pricing and the emergence of new ad forms for devices like interactive TV and cellular phones. While all forms of traditional media will experience slower-than-expected growth, newspapers anddirect mail will be the most affected, losing as much as 18% of their expected allocations in 2004.
“As the online audience continues to grow and e-commerce accelerates, more and more marketing dollars will be drawn to the Web”, Charlene Li, senior analyst in new media research at Forrester, said in a statement. “These trends will be enhanced by the arrival of new technologies that improve the accountability of Web advertising.”
Forrester projects that annual online ad spending will grow from its present high of $2.8 billion to $22 billion by 2004. This figure represents 8.1% of projected expenditures for traditional advertising – exceeding magazine, yellow pages and radio spending.
Although increased ad spending would seem to give content sites leverage in the ad selling process, page view growth will far outpace and spending growth. With new return-on-investment tracking tools and plenty of ad inventory available, marketers will increasingly demand performance-based deals. By 2004, 53% of U.S. online ad spending will be based on performance, Forrester predicts.
The report draws on interviews with 50 online and offline marketers, publicly reported revenues of Internet companies and Forrester data about consumers’ online usage.
In addition, Forrester created models to predict the growth of Internet advertising. The projections were adjusted downward to account for non-cash advertising revenue, including barter ads, revenue sharing and spending within the industry.
