Online ad spending is surging and will surpass its previous pre-dot-com-crash high point by $1 billion this year, according to a new study released by eMarketer.
In 2000, at the peak of the dot-com boom, total online ad revenues reached $8.1 billion. EMarketer's report predicts that 2004 revenues will be $9.1 billion, up from $7.3 billion last year.
Internet-related ad spending is also growing at the highest rate of increase ever -- 25% this year over last year, the digital market research firm reported.
"Our growth projections are all in the 20% range," eMarketer senior analyst David Hallerman told AdAge.com. "The only time that's happened [before] is about 10 years into cable."
He said 2004 is expected to be a year of growth for the advertising industry in general, with overall ad spending increasing from $245.5 billion in 2003 to $264.5 billion in 2004, thanks to "the one-two-three effect" of national political elections, Summer Olympics and an improved economy.
Cable TV increase
But no area is expected to grow as fast as the Internet, according to eMarketer. Cable TV will increase to $15.91 billion -- a 14% jump this year. Broadcast TV will grow about 10%, and newspapers only 6.5%. Online advertising growth is easier to achieve because it starts from a smaller base, Mr. Hallerman wrote in the report, but "[a]fter the dot-com downfall in 2001 and 2002, when online advertising took double-digit dips, the path upwards for interactive media far surpasses that of all media."
On average, 3% of all advertising buys now go online, the report said. One sector moving ahead of that curve in 2003 was financial services at 4.3%. One lagging behind was consumer packaged goods, as marketers put only 0.86% of their ad budgets online.
Mr. Hallerman said the factors fueling the rapid increase in online ad spending include:
* Growing numbers of large companies such as broadcast TV networks and newspaper publishers that are shifting larger parts of their ad budget to online;
* Increasing numbers of businesses of all sizes investing in paid search advertising campaigns;
* Large marketers increasing their use of rich media, such as Flash animations and online video;
* Steady increase in the numbers of consumers accessing the Internet through broadband connections that support much more satisfying kinds online consumer experiences.
For that last reason, Mr. Hallerman said, rich media is going to grow faster than search marketing, which has skyrocketed. Rich media spending will rise by 64.4% in 2004 vs. a 41.3% rate for paid search, the report said.
Currently, search-based advertising represents the largest share of online spending among all online ad formats.