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CMR: Online Ad Spending Dips Further in 3Q

In news that will come as no surprise to the interactive advertising industry, research group CMRi says spending on online ads in the first three quarters of 2001 dipped, as compared to the same time period last year.

According to CMRi, the interactive division of CMR, online ad spending for the first three quarters came in at an estimated $2.1 billion. The company didn't make available figures for the same time period in 2000, but it would difficult to make an apples-to-apples comparison anyway, since the company has changed its methodology somewhat in the intervening months. Using its admittedly flawed figures, the company said spending dropped 17.7 percent year over year.

Perhaps a more telling figure is the difference between the rate of spending in the first two quarters, and the rate of spending in the third. CMRi says Web ad spending for the first half of 2001 totaled $1.5 billion, which would indicate a $750 million average quarterly spending rate. With that in mind, the spending rate for the third quarter comes in at $600 million, showing a decline of $150 million.

Advertising revenues, however, generally drop in the third quarter, with the fourth quarter increasing due to holiday-oriented spending.

"As many look to the holiday season to alleviate the slowdown in online activity, we may see a bright spot in spending post-holiday, especially as more and more traditional companies move their ad campaigns to the Internet," said David Peeler, president and chief executive officer of CMR.

Due to differing methodologies, the numbers CMRi is citing are sharply lower than the ones released recently by the Interactive Advertising Bureau and PricewaterhouseCoopers. At the IAB annual meeting last week, the organization said the first nine months of 2001 saw $5.5 billion in online advertising expenditures. Still, the trend was the same, in that the IAB said spending was down 8.4 percent from last year.

In its research, CMRi found that eBay led Internet ad spending for the first three quarters, finally surpassing General Motors, which has been the perennial leader since the research firm began its measurements. EBay has spent $35.7 million online in 2001 so far; General Motors was right behind it with $35.5 million; and the third biggest spender was the troubled Providian Financial Group, which spent $23.5 million.

Retailers were the biggest spenders in the first three quarters of 2001, shelling out $432.6 million bucks; next came the media and advertising sectors, spending $363.3 million; following those two was the financial industry, spending $260.6 million.

The top recipient of these ad dollars, according to CMRi, was Yahoo!, which garnered $284 million; next came AOL.com, with $252.6 million, and Excite, which brought in $118.2 million. Despite the big numbers, CMRi said Yahoo!'s revenues had declined $8.6 percent from the year-ago time period, when it brought in $311.2 million.

The overall trend is similar, though apparently more severe, than that experienced by the offline advertising world. In a study released earlier this week, CMR said that traditional ad spending fell 7.8 percent in the first nine months of 2001 compared to the year-ago period, from $74.7 billion to $68.8 billion. Of offline media, television was especially hard hit, due partly to the loss of ad revenue during the week of the September 11 attacks, with network TV down 8 percent and spot TV down 17.9 percent. Cable television, though, actually saw a 2.1 percent revenue increase in the third quarter 2001 as compared to last year, and outdoor advertising also fa red well, with a 2.6 percent jump.

Still, CMR's Peeler expressed hope for the online advertising industry, as budget conscious companies try to get the most bang for their buck.

"In order to overcome some of the cuts in ad budgets that most (online) advertisers felt this year, companies are carefully utilizing online targeting capabilities to effectively market brands to appropriate end users," said Peeler. "As companies take advantage of this tactic, the advertising industry is hopeful of seeing a steady increase of dollars budgeted for Internet ad campaigns in the New Year."