The rebirth of online advertising - By the Numbers - related article: Spam Report

Chief Executive, The, Jan-Feb, 2003 by Daniel Tynan

Chief Executive's new column "By the Numbers" will offer a snapshot of a different industry every month -- beginning with technology -- and deliver forecasts from experts on the year ahead.

Though not yet up to the heady levels of dot-com mania, online advertising is on the rise again. Emarketer, a New York research firm, projects that money spent for online ad vehicles will grow at a steady clip for at least the next three years, despite hard economic times. The reason? Marketers are rediscovering the Net's audience of affluent, educated decision makers.

"The Web is the only way to reach professional people during the day," says Greg Strakosch, CEO of TechTarget, an IT portal and newsletter publisher in Needham, Mass. "Executives don't generally watch TV or listen to the radio in the office."

They also spend more time in front of their computers than the boob tube. According to a study by Forbes.com and Research.net, C-level executives surf the Web an average of 16 hours a week-nearly twice the time they spend watching television. Sixty-two percent said Net ads had influenced them to make a purchase, the same figure as print magazines and well above TV (28%) and radio (11%).

But not just any advertisements do the trick. Static banner ads and the universally reviled pop-ups are gradually giving way to more effective forms of marketing. "Rich media" ads featuring moving images and audio now account for 20 percent of the 2 billion Web ads that online advertising firm Doubleclick serves each day. They are also six times more likely to be clicked on, according to the firm's 2002 study.

Meanwhile, paid placement in search engines such as Google grew by 144 percent in 2002, says eMarketer senior analyst David Hallerman. Because users see ads based on the search terms they enter, such ads are more likely to reach the right buyer at the right time.

No online ad vehicle is increasing faster than email, however. Doubleclick's survey estimates that firms increased email marketing budgets by an average of 17 percent in 2002. Forrester Research projects that email ad spending will soar from $2 billion in 2002 to nearly $7 billion in 2006. The increase in electronic ad vehicles will come at the expense of traditional marketing outlets such as telemarketing and catalogs.

"More ad agencies and advertisers are conversant in the Internet and are ready to include it in their marketing plans," says Hallerman. "It's no longer a new, untried medium."

ONLINE AD SPENDING

Advertisers are expected to put their money back into Web ads, but fall
slightly short of their peak in 2000.

2000  8.2
2001  7.2
2002  6.4
2003  6.7
2004  7.2
2005  8.1

Source: eMarketer Study, December 2002

Note: Table made from bar graph

C-LEVEL EXECS' PREFERRED SOURCE FOR INFORMATION ABOUT NEW PRODUCTS

More top-level executives hit the Net when making purchasing decisions.

Internet    73%
TV          57%
Magazines   29%
Newspapers  20%
Radio        8%

Source: Forbes.com & Research.net study, Feb. 2002

Note: Table made from bar graph

CHANGES IN 2002 MEDIA MARKETING BUDGETS

Overall ad budgets aren't increasing much, but email and other
interactive marketing vehicles are getting a bigger slice of the pie.

Email                17%
Online Marketing      9%
Print Ads          -1.4%
Radio              -3.0%
Direct Mail        -6.9%
Catalogs          -13.4%

Source: Doubleclick.net & Greenfield Online survey, June 2002

Note: Table made from bar graph

RELATED ARTICLE: SPAM REPORT

* Odds that email was spam (unsolicited commercial message) in January 2002: 1 in 199

* Odds that email was spam in November 2002: 1 in 8

* Month that spam is expected to surpass legitimate email: July 2003

Sources: Forrester Research. Doubleclick. MessageLabs, cyberAtlas. Forbes.com. eMarketer.