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Japan's 1998 Internet Ad Spending Tops 11 Billion Yen

Japan's domestic Internet advertising market grew by 89 percent in 1998, according to a survey by the nation's top advertising agency Dentsu Inc.

Based on data obtained through its third annual survey of Internet advertising expenditures in Japan, announced on March 16, Dentsu estimates that corporate spending for ads on major Japanese sites reached 11.39 billion yen (US$95.8 million) in 1998.

This marks an 88.6 percent growth from the previous survey's tally of 6.04 billion yen (US$50.3 million) for 1997, and it surpasses Dentsu's spring 1998 forecast of 9 to 10 billion yen for the entire calendar year.

The Dentsu estimate covers production costs and placement fees for Internet advertising targeted at the domestic market by information providers operating in Japan.

Internet advertising is defined by the survey as independent ad content placed on major sites at clearly specified per-space rates. It does not include fees for server rental, mall services, or directory links.

The 1998 increase in Internet advertising spending came amid an overall drop in advertising expenditures by Japanese firms. According to a Japan media market survey released by Dentsu in February, total 1998 advertising revenues were down by 3.8 percent to 5.76 trillion (US$48.0 billion) yen.

At just two-tenths of one percent, Internet advertising is barely a drop in the bucket of the nation's total ad market.

Last year's 89 percent rise in Japanese Internet ad spending was slower than the pace of the previous year. Dentsu estimated Japanese Internet advertising expenditures in 1997 at 6.04 billion yen (US$50.3 million), a nearly 280 percent jump over 1996's 1.60 billion yen (US$13.3 million).

Dentsu forecasts that Japan's Internet ad market will increase a bit more slowly, by about 74 percent, this year.

"If the current rate of growth continues," said Dentsu, "Japanese Internet-related advertising expenditures will grow to about 19.80 billion yen (US$165.0 million) in 1999."

The survey does not address the efficacy of banner advertising, something that remains open to question since most Japanese Internet users do not surf to the same extent that users in the US do.

Dial-up users in Japan must pay a time-based telephone connection fee (the cost of a daytime local phone call is 10 yen ($0.083) per three minutes).

A common pattern of usage, therefore, is either to go directly to only one or two favorite portal sites, or to skip quickly between sites by clicking on links while saving or printing pages of interest to be read later offline.

A Nikkei Market Access (NMA) survey found that Japanese users typically spend less than 20 seconds viewing more the majority of Web pages they access. This suggests that, except for a few popular portal sites, Japanese users are less likely to pay attention to banner ads, let alone click on them.

In an experiment aimed at creating greater visual impact and increasing ad effectiveness, Excite Japan in February signed a contract with Coca-Cola Japan to display the bottler's logo and other promotional illustrations as part of the page background.

Interestingly, e-mail--a medium not considered by the Dentsu survey--is enjoying increasing success as a vehicle for advertising in Japan.

Users responding to a 1998 Nikkei Multimedia survey said that they are more likely to access an advertiser's site listed in an interesting ad in an e-mail newsletter than to click on a webpage banner ad.