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Online Ad Business To Reach $28bil by 2005

Calling the Internet the "first marketing medium to offer global reach," Jupiter Communications Inc., a research firm specializing in Internet commerce, said that total online advertising revenues are expected to grow to $28 billion worldwide by 2005. That figure is up from 1999 online ad revenues of $4.3 billion.

But Jupiter also says that the majority of companies that market globally will be ill-prepared to leverage the Internet to communicate with consumers worldwide.

Jupiter Communications released these findings today before the Global Online Advertising Forum, taking place Monday and Tuesday in Cannes, France. According to the research firm, current online spending was calculated based on public financial filings and extensive interviews with online ad sellers. Based upon this information, Jupiter says it generated forecasts taking into account current online penetration and usage behavior, future size of the online audience, Internet commerce potential, off-line ad spending, media consumption and supply-side growth estimates.

According to the research, nearly 6 percent of all global advertising revenue is expected to be spent on the Web by 2005. Jupiter analysts believe that this growth will partly be driven by the rise in online population worldwide, which Jupiter says will more than double within the next five years, rocketing from 300 million present users to 800 million users in 2005.

Even though Jupiter says that the expected growth in audience and ad dollars provides many opportunities for global brands looking to move beyond traditional advertising inefficiencies when communicating with consumers worldwide, there will be challenges. These challenges include a dependence on regional media-buying efforts, lack of adoption of innovative online ad models, and integration snags over both media and platforms.

Jupiter believes that these challenges will limit businesses in their efforts to use the Internet to drive effective communication on a global basis.

"While the numbers paint a compelling picture for the Web as a global channel for advertisers, there are significant hurdles to making the Internet a superior global communication tool," said Evan Neufield, vice president of international research for Jupiter, in a statement prepared to coincide with the Global Online Advertising Forum. "The challenges are commensurate with the opportunities," he said. "Brands that can innovate and adapt to the increasingly fragmented media mix online and off-line, realize and overcome traditional inefficiencies in the way in which they communicate with consumers globally will become global winners, as will media companies and agencies that partner with them to achieve these ends."

Neufeld identifies several specific challenges that marketers will face. Among them is the concern that significant differences in the market sophistication, coupled with hesitancy of advertising to move from regionally focused media buying, will limit effective global reach. As an example, Jupiter cites that online ad spending totaled $3.5 billion in North America in 1999, while Western Europe - the world's second largest market - accounted for only $400 million, nearly nine times less. Asian ad spending was even smaller, with only $200 million spent on online advertising in 1999.

According to Neufeld, media buyers and sellers are historically hesitant to embrace innovation in media and pricing models. With as few as one in five publishers offering results-based pricing, he believes that the efficiencies that the Internet can and will offer over traditional marketing media will be limited.

Finally, Neufeld believes that the inability of traditional players and agencies to conduct highly integrated campaigns across media will be exacerbated by increasingly more complex platform issues; especially with the growth of non-PC access such as via wireless devices and interactive digital TV becoming increasingly commonplace.


Sherman Fridman, Newsbytes, June 19, 2000

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