Don't expect jump
in 2002 web ad $s

Forrester sees a flat year after 2001's 18.7% drop

By Marty Beard

Thereís hope for online ad spending. Just don't hold your breath.
    Spending on online advertising will triple by 2004, with the typical major online marketer budgeting $4 million for web advertising.
    But 2002 will be flat at best, following this yearís 18.7 percent decline in online advertising, predicts a top Forrester Research analyst.
    "Companies are putting their 2002 budgets to bed now, and given the uncertainty, budgets are going to be tight next year," says Forrester analyst Jim Nail, lead author on a recent Forrester report on online spending.
    Some experts believe the recession, which began last March, could end as early as February or March 2002.
    But Nail points out that even such an early recovery will come too late for 2002 ad budgets.
    "Budgets are pretty much set for the year, and itís really hard to go back and get more money," Nail says.
    "If the economy does turn around in the spring, then the 2003 marketing budgets will have more room," Nail says.
    Twenty-four percent of the 50 marketers surveyed for the report say they hope that an economic upturn will pump more online ad dollars into their budgets.
    Forty-six percent say they would consider shifting money allocated for other ad media to interactive marketing after evaluating its performance.
    Another factor affecting ad spending is the ongoing shift from online advertisers to more traditional advertisers.
   It has been a dramatic shift indeed.
   In 2000, two-thirds of online ad revenue came from other internet companies. But this year about 60 percent of online ad revenue is coming from traditional companies.
    "What weíre seeing is that the dot.coms are dying a lot faster than the traditional companies are moving," says Nail.
    But also working against online ad spending are some still-unresolved concerns about its effectiveness.
    For instance, 55 percent of brand marketers still look at click-throughs as a critical metric of web advertising's effectiveness, even though click-throughs have been largely dismissed by web marketers.
   They also appear to remain unpersuaded of the web's power as a branding medium, despite evidence from multiple studies.
    "Marketers have doubted these findings, saying that the evidence is still insufficient or citing methodological blemishes," the report says.
    The Forrester report speculates that it wonít be until 2003 that the message gets though.
    Through then, the report predicts, traditional marketers will run small-scale tests, which will be key in persuading them that the medium is a good place for their marketing dollars.
    "One of the things theyíre trying to understand is the real value of interactivity," Nail says.
    "While marketers see the potential, they donít really know yet how to reliably monetize that potential. So they still have to do some small-scale tests and experiments and build knowledge before they say, 'Ah-ha, now I can move 5 percent to 10 percent of my budget into internet advertising because I know exactly what Iím going to get.'"
    Part of the problem is a lack of standards, and Forrester asserts that increasing concentration in the internet sector will take care of that.
    AOL, Yahoo and MSN already account for 60 percent of all online ad revenue, which puts them in a good position to dictate online ad standards, both in terms of metrics and creative formats.

November 30, 2001 © 2001 Media Life

-Marty Beard is a staff writer for Media Life.

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