Report: Traditional Marketers to Spend $63 Billion Online by 2005

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Traditional advertisers will embrace multichannel online marketing and will spend $63 billion on it annually by 2005, according to a report by Forrester Research.


Online advertising alone is expected to reach $42 billion worldwide by then.


The report said that as traditional advertisers learn that online marketing is "just the first stage of a campaign, they will augment budgets for later-cycle activities like promotions and e-mail" and will boost online marketing spending in the United States from $11 billion in 2000 to $63 billion in 2005.


"Online advertising's current swoon won't last," said Jim Nail, a senior analyst at Forrester Research. "The dot-com tide has begun to ebb. While dot-coms accounted for 69 percent of digital marketing in 2000, by 2005 traditional advertisers will embrace it, driving 84 percent of digital marketing."


Nail also said marketing through promotions will grow 42 percent annually. More than $6 billion will be spent on e-mail marketing alone in 2005.


He said traditional advertisers will embrace online marketing in three waves, starting with the "early movers" -- companies that started advertising online before 1999 -- which will account for 32 percent of all online marketing by 2005.


Mainstream advertisers, those that took a wait-and-see attitude toward online marketing, will begin to use multichannel techniques by 2002 and will represent 41 percent of the overall market by 2005.


The report also said manufacturers of "low-consideration" products such as soft drinks and household cleaners will begin to take the Internet more seriously in 2002. By 2005, they will account for 11 percent of all online advertising.


"The recovery won't begin until marketers master integrated digital marketing techniques," Nail said.


Forrester Research, an independent Internet research firm, surveyed 59 marketers for the report. It found that online marketing per company will rise from $550,000 this year to $1 million in 2003.
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