The move to online advertising is happening faster than analysts anticipated as companies devote more of their budgets to the Internet than to traditional media.
The market for online ads will increase 32 percent to $16.6 billion next year, fueling growth at companies including Google Inc. and Yahoo Inc., Credit Suisse First Boston analyst Heath Terry said in a research report. He had previously forecast 21 percent growth.
Sales of online ads that have animation, sound or interactive features will jump 66 percent next year to become the fastest-growing area of Web ads, Credit Suisse predicts.
Yahoo, the most-visited Web site, and No. 1 search-engine Google are winning business at the expense of publishers and broadcasters.
"We're seeing a shift to a more diverse set of media choices," said Mary Baglivo, chief executive of the New York office of advertising agency Saatchi & Saatchi. "Certainly a move away from what had traditionally over the years been the vast majority television and print."
Saatchi & Saatchi's clients include Cincinnati-based Procter & Gamble Co. and Minneapolis-based General Mills Inc. The agency is a unit of Paris-based Publicis Groupe SA, the world's fourth-biggest advertising company.
Almost half of the ad executives in a Credit Suisse survey intend to increase Internet spending by almost 30 percent in the next year, according to the brokerage's Dec. 9 report.
The study, conducted by New York-based market researcher TNS Media Intelligence for Credit Suisse, included 90 companies and 10 ad agencies, with average accounts of $22 million.
Sponsored links next to search results, the main source of sales for Google, and graphical display ads, like the banners seen on Yahoo's site, will remain the two most popular types of online ads in 2006, Credit Suisse's Terry forecasts.
Still, display ads will be the slowest-growing ad type next year as spending on animated, or so-called "rich media" ads, increases, according to Credit Suisse. Terry forecasts that group will overtake banner ads in 2008.
"Video is the most compelling and emotive creative medium available for advertisers," said Nate Elliott, an analyst with Jupiter Research in London. "It does the best job of creating emotion."
Hewlett-Packard Co., the world's biggest printer maker, last week placed animated spots for its Photosmart photo printer on Yahoo's home page, and 30-second spots that roll before music videos on Yahoo Music.
Other video advertisers on Yahoo included PepsiCo Inc.'s Doritos and General Motors Corp.
Ad executives in the Credit Suisse survey last month slated the biggest part of their budgets for Internet ads, compared with a No. 3 ranking behind magazines and broadcast TV in a survey conducted during the previous quarter.
Jonathan Thaw, Chicago Tribune. December 29, 2005
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