US Online Ad Spending To Rebound.

Jupiter Media Metrix reports that while online ad spending in the U.S. will increase only five percent in 2001, it will rebound and grow at a compound rate of 22 percent over the next five years – reaching a total of over 15 billion dollars by 2006. However, new research released today at the Jupiter Online Advertising Forum reveals that spending on digital marketing initiatives such as coupons, promotions and e-mail will surpass that of advertising and reach over 19 billion dollars during the same time period. Jupiter analysts have found that Web publishers must diversify advertising opportunities or they risk losing money to these other online marketing initiatives.

“Marketers’ inability to evaluate online advertising effectively has lead to the current hiccup in spending,” said Marissa Gluck, senior analyst for Jupiter Media Metrix, from today’s Online Advertising Forum. “Online advertising, when fully measured, remains a strong impetus of consumer action — including increasing traffic and sales, inspiring loyalty and promoting referrals. While reduced financial resources is still a key factor inhibiting the growth of online advertising, the primary online advertising industry stimuli are still around and will be.”

Highlights from the latest Jupiter Media Metrix online advertising forecast, released today at the Online Advertising Forum, include:

— According to the Jupiter Internet Advertising Model, online advertising will account for seven percent of the total advertising market in 2006- up from three percent in 2001. Jupiter analysts say that as the Web audience continues to grow, marketers will follow the eyeballs. Jupiter analysts identify the following factors as catalysts for growth in consumer eyeballs to the Internet: increasing use of consumer Internet services; technology improvements that result in more fulfilling online user experiences; increasing number of online veterans’; and Internet-driven business cost savings. Jupiter analysts say that these consumer-driven trends will be the primary drivers of traditional brand advertisers to the Web.

— Traditional advertisers present the greatest opportunity to struggling ad sellers. Jupiter analysts have found that many of the largest offline ad spenders, particularly those that sell high consideration, information-intensive products, will also make up the bulk of online spending in the next five years. The Jupiter Internet Advertising Model shows that financial services companies will account for the most online ad spending by 2006 – a total of 2.1 billion dollars.

Automotive and media companies will be the next largest online ad spenders, accounting for two billion and 1.6 billion dollars, respectively.

— Pay-per-performance advertising will experience only slow growth over the next five years. The Jupiter Internet Advertising Model shows that pay-per-performance spending will account for just 22 percent of all online ad spending in 2001 and will only increase to 30 percent by 2006. Jupiter analysts warn that the cost-per-thousand impressions (CPM) model is not dead and advise that the misuse of pay-per-performance will result in its return as publishers fail to meet advertiser demand.

“Currently, the online advertising industry is more mature than digital marketing initiatives such as sweepstakes, coupons and promotions,” Gluck said. “However, as marketers demand a greater impact from their online investment, publishers risk losing dollars to marketing initiatives that don’t require their involvement, such as online contests, movies and games. Publishers must find ways to diversify their offerings to become more appealing to advertisers and should explore types of integrated relationships that focus on product and consumer rewards.”

For more information at http://www.jmm.com.