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Online Ad Spending Continues To Rise
Major Marketers Focus More Resources on Internet

Led by financial services and telecom companies, online ad spending continues to rise, according to a new study by Nielsen/NetRatings.

Those two sectors increased their ad spending by $100 million from the first quarter of 2002 compared with the first quarter of this year. The $100 million accounts for 58% of the $172 million total increase in online ad spending during the same period, as reported by the Interactive Advertising Bureau.

"We're putting 15% to 17% of our overall media budget toward interactive marketing and media, but I'd like to get to 30%," said one financial services executive in an interview at last week's iMedia Brand Summit in Santa Ana Pueblo, N.M.

90% automotive increase

The Nielsen/NetRatings report found that business and consumer services; automotive; pharmaceuticals; travel/hotels/resorts; insurance; and real estate have all focused more of their marketing resources online during the past year. For example, automotive marketers increased ad spending by $30 million, from $27 million in the first quarter of 2002 to $57 million in the same quarter of 2003, an increase of 90.5%.

Sports and recreation sites are top beneficiaries of the increased spending by automakers such as DaimlerChrysler, General Motors Corp., Ford Motor Corp., Honda Motors, Nissan and Toyota. All have shifted more marketing dollars into the interactive medium.

'More concerted' moves

"Three years ago some analysts thought that the online ad downturn would be short-lived because the big advertisers would come to the rescue," said Charles Buchwalter, vice president of client analytics at Nielsen/NetRatings. "But their timing was way off -- three years later, we now have some real evidence that the large ad-spending industries, i.e., financial services, telecommunications, autos and pharmaceuticals, are starting to adopt the online medium in a more concerted manner.

"For some of these large-spending industries," he said, "the online share of total media spend continues to be small, but these 'small' shares are shares of huge total spending, which is why online ad spending is starting to show some real gains after more than two years of free fall."

Travel, hotel and resorts

The travel, hotel and resorts sector reported a 15.5% increase ($15 million) during the period, while the insurance and real estate sector increased 29% by $10 million.

Online ad spending in the drug/remedies segment jumped by $26 million during the same year-over-year period, according to Nielsen/NetRatings.

Drug giants such as Astra-Zeneca and Glaxo SmithKline said they are upping their online spending with much of those buys aimed at Internet search-related advertising. Kimberly Lyons, strategic brand initiatives and Internet manager at Revlon, said the cosmetics giant will increase its online media spending in 2004, though it will remain less than 5% of the cosmetics marketer's overall media budget.

Consumer package goods giants including PepsiCo, Anheuser-Busch, Altria and Coca-Cola Co. are also slowly shifting dollars from TV to online.

15% increase through 2003

Mr. Buchwalter projected that online advertising spending could grow by 15% this year.

"Rising cost-per-thousand [viewers] and emerging standardization in the online ad space is creating the possibility of the medium becoming more profitable for agencies to play in," he said.

Posted on aef.com: October 3, 2003


Tobi Elkin, AdAge.com. September 29, 2003

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