Jupiter Communications: Online Growth to Serve as Catalyst for Traditional Ad Business; $11.5 Billion Market by 2003 Hides Erosion and Drives Change Among Buyers and Sellers

Business Wire, August 18, 1999

NEW YORK--(BUSINESS WIRE)--August 18, 1999--

Online advertising is expected to grow to $11.5 billion in 2003, surpassing dollars spent in some traditional media, but will look less like traditional advertising and have far-reaching effects on the off-line world (including erosion and increased expectations), according to new research released today by Jupiter Communications. The Jupiter research, presented to attendees of the Jupiter Online Advertising Forum, shows that ad spending will increase 40 percent over the next four years, with financial services, automotive, and media ventures, not packaged goods, leading the spending.

Driven by the growing online population, the rise in time spent online, increasing digital commerce adoption, and an increase in inventory sold, online advertising revenues have already surpassed those for outdoor advertising and will exceed spending for cable advertising and equal roughly three-quarters of today's radio spending by 2003. However, heavy consideration products and services, such as financial services, and automotive will continue to dominate off-line advertising. The media, financial services, and automotive sectors will account for nearly half ($4.2 billion) of all online ad spending in 2003. Compared with their 18 percent share off-line, consumer packaged goods companies, will represent a much smaller slice (7 percent) of the online advertising world even into 2003.

The industry should consider this growth a wake-up call, according to Jupiter's analysts. "Online advertising will serve as a catalyst for change in the traditional ad business. Media integration and the inevitable erosion of traditional markets will be more important than the effects of online ad dollar growth," explains Patrick Keane, senior analyst and director of Jupiter's Online Advertising Strategies. "This is less about the online medium evolving to fit advertisers needs than it is about advertisers evolving to fit the needs of the medium, and ultimately, consumers."

The classifieds market is expected to be one victim. For the online classifieds market, price erosion posses a serious threat. Online classifieds is expected to grow from one percent of the overall classifieds market in 1998 to 6.4 percent by 2003, but revenues will only reach $1.4 billion. The proliferation of free and deeply discounted models will prevent the revenues from growing with usage. With this in mind, Jupiter estimates that off-line classifieds providers such as newspapers stand to loose $3.2 billion, or 13 percent, of what the market would be without the impact of online classifieds. While this impact will directly affect the classifieds market, it will ripple other off-line targets as advertisers begin to demand increased efficiency, accountability, and higher interactivity for their money.

Keane also cautions that advertisers must stop thinking of online ad media as separate from off-line efforts. In a recent Jupiter survey of leading online advertisers, only 30 percent currently use cross-media audience measurement or reporting, and 57 percent said that they never or infrequently compare online and off-line media performance.

Now in its fourth year, the Jupiter Online Advertising Forum is one of the flagship events for the online advertising industry. This year's event, August 17 to 19, at the Sheraton Hotel and Towers in New York City, will attract more than 1,500 delegates, up from 850 last year, from both the traditional and online advertising communities and covers some of the leading issues facing online marketers today.

Session topics include "Online In The Media Mix: Is Integrated Marketing A Reality?"; "Trends In The Consumer Internet Economy"; "Fear And Doubt: The Web And Brand Advertisers"; "The Reengineered Agency"; "The Fight For Ad Dollars: Media Companies And The New Competition"; and "A Global Perspective: Interactive Advertising."

This year's agenda features keynote presentations from Phil Guarascio, vice president, corporate marketing and advertising, General Motors N.A.; Tim Koogle, president and CEO, Yahoo!; John J. Dooner, Jr., chairman and CEO, McCann-Erickson WorldGroup; and Kevin O'Connor, chairman and CEO, DoubleClick. In addition, Jupiter analysts will lead discussions with leading industry players including: Carla Hendra, president, OgilvyOne; Rich Marino, president, CNET; Rich LeFurgy, chairman, Internet Advertising Bureau; Chris Kitze, chairman and co-founder, Xoom; Kurt Campisano, SVP, Internet marketing, First USA; Randy Kilgore, director, advertising, Wall Street Journal Interactive; Robert Saltzman, VP, corporate sales and development, CDNOW; Eric Heneghan, CEO, Giant Step; and Kyle Shannon, co-founder and chief creative officer, AGENCY.COM.

The Jupiter Online Advertising Forum also features more than 65 exhibitors showcasing innovative services and technologies. Primary sponsors of the conference include NFO Interactive, MSN Sales, The Industry Standard, UpsideToday.com, and Forbes magazine.

Jupiter will produce three additional forums in 1999, including the Jupiter Financial Services Forum, Jupiter Consumer Online Forum-Europe, and Jupiter Entertainment Forum. To register or to receive further information on Jupiter forums, contact Jupiter at (212) 780-6060 x424 or (800) 405-4413 x424, or visit Jupiter online at www.jup.com. Journalists can apply for press passes on Jupiter's Web site by visiting www.jup.com/events/forums/advertising/press.html.>