Internet advertising will continue to grow at a fast pace, according to a report to be issued next week by Forrester Research Inc., Cambridge, MA.
The group estimates that global spending for online advertising will reach $33 billion by 2004, one-third of which will be spent outside of the U.S. The increase in spending will come from several sources, including the reallocation of dollars from traditional media.
Over the next five years, the Internet will siphon $27 billion–or 10% of all U.S. ad spending–away from traditional media. This reduction will occur through a combination of direct transfers of dollars, downward 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 and direct mail will be the most affected, losing as much as 18% of their expected revenues 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 U.S. online ad spending will grow from $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 ad spending growth. With new ROI tracking tools and plenty of ad inventory available, marketers will increasingly demand performance-based deals. By 2004, Forrester predicts that 53% of US online ad spending will be based on performance.
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