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Internet Ad Spending Continues To Increase
eMarketer Study Predicts Return to $8 Billion by 2006

Internet advertising spending is increasing steadily and will reach or surpass $8 billion annually by 2006, according to the latest study by eMarketer.

Among other things, the $8 billion figure is important for its symbolism -- it represents the peak level of online ad spending in 2000, just before that era's superheated Internet economy imploded.

12.2% increase

After falling to $6 billion in 2002, Internet ad spending stabilized and has increased by 12.2% this year, according to the e-Marketer report.

Many observers view eMarketer's findings as particularly meaningful because the results are so broadly based. The company doesn't conduct its own narrow market studies but rather surveys and aggregates the findings of hundreds of other research organizations.

One item cited is a report by the Online Publishers Association that says first quarter 2003 online ad revenues at 24 member companies increased by an average of 40.7% over first quarter 2002 revenues.

'Come a long way'

"We've come a long way, but we've got a long way to go," said Michael Zimbalist, CEO of the Online Publishers Association, which represents TV, magazine, newspaper and other media companies with large online holdings. Members include companies such as The New York Times Co., Hearst Publications, Forbes, ESPN, MSNBC and Cox Enterprises.

Mr. Zimbalist suggested the resurgence in Internet business vitality is because the medium has become a core part of consumers' lives.

The eMarketer report also arrives as U.S. auto marketers announced an expansion of their own spending on Internet advertising for the seventh year in a row and giants like McDonald's Corp. indicated plans to shift more of their budget away from traditional media toward online media, which has become a favored communications venue of younger consumers.

Search engine ads

According to Geoff Ramsey, eMarketer's CEO, search engine-based advertising and broadband connectivity are among the top trends driving the new growth in online advertising. In fact, almost as if on cue, as e-Marketer was issuing its report, Yahoo! announced it was acquiring search engine advertising company Overture for $1.63 billion. The deal is widely seen as likely to alter and intensify the online advertising landscape as Yahoo!, Google and MSN compete to provide more effective search-based ad services.

"The hype is gone," said Greg Stuart, CEO of the Interactive Advertising Bureau, who concurs with the latest study's thesis that the Internet is making a major comeback.

"The online phase of overexuberance from public and private sectors has worked its way through the system," he said. "Now marketers are making fact-based decisions."

Posted on aef.com: July 18, 2003


Katie Johnson, AdAge.com. July 15, 2003

Copyright © 2003 Crain Communications, Inc.. All rights reserved.