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US e-advertising to expand this year
Wednesday, April 10 2002
by Matthew Clark

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A new study in the US says that the Internet advertising market will expand this year after facing a severe slump in 2001.

The report claims that the total value of on-line advertising in the US fell 11 percent in 2001. Conversely however, the same report offers a positive outlook for the industry this year saying that the US on-line advertising market will increase 11 percent to USD8.1 billion by the end of the year.

In the report, "Online Advertising: Statistics, Strategies, Projections & Trends," Emarketer claims that growth will continue throughout the next three years, projecting USD13.5 billion in spend on Internet ads by 2005. In 2003 the market should be worth USD9.2 billion and in 2004 it will climb again to hit USD11.4 billion, Emarketer said.

These figures from Emarketer fall in the middle range of analysts' predictions for the US Internet advertising market in 2002, with the Yankee Group near the bottom of the list predicting only a 3.5 percent rise and IDC predicting a 20 percent hike. Other predictions are more extreme still; McCann Erickson and Morgan Stanley both predict no increase in e-advertising spend this year, while Gartner G2 says there will be a 44 percent rise.

Importantly, the market will also begin to recapture more of the total share of advertising in the US and is projected to account for around 3.1 percent of the advertising market in 2002 after falling 0.3 points to 2.9 percent in 2001.

The recovery in the industry will come in part from an increase in the number of people on the Web in the US and Canada. According to Emarketer, the compound annual growth rate (CAGR) of people on-line in the two nations will be 14.3 percent from 2000 to 2004 which means a growth from 108.1 million Net users in 2000 to 184.5 million in 2004. Globally, the Internet audience will climb from 352.2 million in 2000 to 709.1 million in 2004.

Over the same period the number of people on-line in Europe will grow by a CAGR of 21.7 percent in Europe, the report claimed, which could spell good news for e-advertisers here.

"Is business up on last year? Yes it certainly is," explained Colin Joyce, director of on-line advertising at Adculture in Dublin. "We are still crunching the numbers, but we (Adculture) are looking at a five to seven percent increase for the first quarter, and if trends for the second quarter continue, we could see between a five and 11 percent increase."

"Last year was a mixed year in Ireland for advertising with Foot and Mouth and September 11th; But suddenly all of that is gone and there seems to be a new strength in the market," Joyce told ElectricNews.Net.

Meanwhile David Hallerman, Emarketer analyst, said "The news is where the money is being spent." According to Hallerman, banner ads, which traditionally have accounted for the bulk of on-line ad revenues, are declining.

"Large, rich-media ads are getting better click-through rates. DoubleClick says the big ads, in combination with less ad clutter on-line, are responsible for click-through rates increasing from the usual 0.25 percent to 0.50 percent range to over 0.8 percent this past month (March)," Hallerman said

The Emarketer report also points to other factors that will drive the industry, saying the growth of broadband access in the US will be a major factor. According to a Nielsen//NetRatings report cited by Emarketer, users with a broadband connection spend 23 percent more time on-line and visit 55 percent more sites because the pages load quickly. Emarketer says there were 6.2 million broadband users in the US in 2000 but by 2004 there will be 34.7 million.

Joyce however was not so positive about broadband and its affect on the e-advertising market in Ireland, claiming that take up ISDN over the coming months could have more implications. With broadband currently unavailable in Ireland, Joyce said that he expected ADSL take up to be limited among home users for the first 18 to 24 months after it is launched.

In the meantime consumers will look to ISDN, claimed Joyce, which is slower than ADSL, but still offers a faster connection than standard phone lines. And with widespread take up of ISDN, on-line ad companies in Ireland will begin to create more compelling ads, which will drive the market and make it more appealing to mainstream advertisers, he said.

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