Net Ad Spending Forecast to Bounce Back

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Online advertising's dot-com-bust hangover may finally be cured in 2003.


Though U.S. Internet ad spending fell 11.9 percent in 2002 to $5.7 billion from $6.5 billion in 2001, online ad spending should grow this year by 7.4 percent, according to market researcher CMR/TNS Media Intelligence.


The numbers are somewhat in line with those of research aggregator eMarketer, which estimates that U.S. online ad spending was $6.3 billion in 2002, down 12.6 percent from $7.2 billion in 2001. EMarketer predicts that online ad spending will reach $6.7 billion in 2003, up 6.3 percent from 2002.


One reason for the difference in dollar amounts is that CMR/TNS, which is owned by Taylor Nelson Sofres, does not include e-mail marketing and online classifieds in its figures while eMarketer does.


"The absolute dollars are a little different, but they're still pretty much in line," said David Hallerman, senior analyst at eMarketer. "The best thing about the bursting of the Internet bubble is that it's given [Internet advertising] a chance to be one of the mainstream media used for advertising. When was the last time you heard the phrase, 'the Internet changes everything?'"


Another development that bodes well for online advertising, he said, is that people who have grown up with the Internet, and see it as a natural part of the marketing mix, increasingly are taking positions of responsibility at ad agencies and their clients.


Moreover, eMarketer and CMR/TNS, both based in New York, are not the only ones whose research indicates Internet advertising may be recovering from having been overhyped in the late 1990s. In the latest figures available, trade group Interactive Advertising Bureau recently reported that online ad revenue for third-quarter 2002 was $1.47 billion, up 1 percent over second-quarter 2002 -- the first increase in six quarters.


However, Internet advertising still has a lot of maturing to do. It accounts for less than 3 percent of overall ad spending, according to eMarketer.


Also, buying online media is still too complicated, said Doug Knopper, vice president and general manager, online advertising solutions, at New York marketing services and technology provider DoubleClick.


"The medium is still too hard to buy. ... It takes too many people," Knopper said when introducing an online ad panel discussion at the firm's Insight 2003 conference this month. "The supply and demand curve is still at a fundamental imbalance," he said, referring to online ad inventory that often goes unsold.


In related news, overall ad spending nationwide for 2002 was a better-than-expected $117.3 billion, up 4.2 percent from $112.5 billion in 2001, according CMR/TNS.


"Despite geopolitical and economic uncertainties, the marketplace outperformed our expectations for the year," Steven Fredericks, president/CEO of CMR/TNS, said in a statement.


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