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Study: Internet Not Sharing in Ad Industry Gains

Overall advertising spending for the first half of 2002 rose 2.3 percent over the same period last year, according to researcher Nielsen Monitor-Plus, but the online part of the business declined more than 8 percent.

Six of the nine media categories studied by Nielsen Monitor-Plus, a service of Nielsen Media Research, saw increases in advertising activity. Local newspapers showed the greatest growth, at 9 percent. Hispanic TV climbed almost 7 percent, a gain partially attributed to this year's World Cup soccer tournament. Network, Cable, and Spot TV increased 2 to 3 percent, and Spot Radio grew by 1 percent.

Internet advertising, which showed an 8 percent decline over 2001, wasn't alone in the doldrums. Syndicated TV advertising fell a commensurate amount, while National Magazines declined slightly.

Nielsen//NetRatings Director of Analysis Marc Ryan said the continuing decline in the fortunes of the Internet medium can be attributed largely to the hemorrhaging of the biggest advertisers, who are still staying away from the Web in droves.

"There were more Fortune 500 companies online last year than this year," Ryan said. "That's the main reason we've seen the numbers come down."

Ryan added that the general reticence of top advertisers to invest their ad dollars online was a matter of unfamiliarity rather than cynicism.

"When it comes time to make cuts, you go with what you know," he said. "The continuing downward trend doesn't mean the medium is less effective or more expensive."

The Nielsen numbers don't exactly jibe with the latest figures from the Interactive Advertising Bureau, PricewaterhouseCoopers, and CMR -- although these studies only considered the first quarter of 2002. An IAB/PWC study released last week showed Internet advertising down an estimated 18 percent from the same period last year. CMR found Cable TV ad spending down 13.8 percent in the first quarter, while Magazines were down 9.6 percent, and National Newspapers experienced an 8.5 percent drop. CMR found Spot Radio up 9.5 percent, and Network TV rising 6.6 percent.

One is left either to conclude that things either changed significantly in the second quarter of 2002, or to resign oneself to the idea that the numbers are simply all over the map.

According to the Nielsen study, traditional media saw the largest share of dollars coming from the automobile category, followed by restaurants, motion pictures, department stores, and prescription drugs, while the music industry led the list of spenders on the Internet. Bertelsmann AG, with its BMG music club, and Columbia House dominated spending on the Internet, illustrating the ascendance of direct response advertising online.

Other retail categories followed the music advertisers, including Amazon.com, eDiets.com and Barnes & Noble. Several of 2001's top advertisers do not appear in this year's top ten, accordint to Nielsen. These include AOL Time Warner, eBay and Verisign. Newcomers to the upper echelon of advertisers include AT&T, USA Interactive and Citigroup.

It remains to be seen whether the decline will be offset by an increase in online direct marketing spending this year, as was predicted in June 2002 by research from Greenfield Online, DoubleClick and agency Beyond Interactive.

The firms' Marketing Spending Index, which surveyed about 200 U.S. executives and brand managers, found that 61 percent of the respondents said they're likely to increase e-mail marketing budgets from last year.

"As companies' revenue from their Web sites increases, online and e-mail marketing are inevitably becoming larger components of the marketing mix," said DoubleClick Chief Marketing Officer Susan Sachatello, when the survey was released.