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RealTime IT News

King Of All Media? Internet Ad Forecast--$23B By 2002

Given its dynamic nature and ability to go where no other medium has gone before, namely everywhere, we forecast that this year's $1 billion Internet ad expenditures could grow to more than $11 billion in two years on its way to 50%-plus growth the next four years.

Fueling such an enormous growth curve are several factors, including: the increased ubiquity of the global computer network; its ability to target demographics more efficiently than any other medium; its global nature that's "always on"; increased marketing muscle being thrown at it via software and sales; and its ability to absorb aspects of every other medium into a melting pot experience that borrows a bit of TV, radio, newspaper, telephone, cable, direct mail, and billboards.

In other words, we think the Internet could gain ad, marketing, and direct mail share as it melds aspects of other media into its experience. As a result, marketers and sellers of goods and services cotton to the notion of displaying ads and sponsorships 24 hours a day around the world. Suddenly a Super Bowl minute pales to being in front of a potential audience of 1 billion every day via the Web.

Trends such as WebTV further support the argument of the Internet becoming a leading ad platform. Today's broadcast TV universe reaches 100 million U.S. households. Today's WebTV reaches 100,000. But 67 million cable subscribers may be upgrading that little cable converter black box soon and our hunch is Microsoft wants it to be WebTV.

In that context the $425 million Microsoft reportedly paid to acquire WebTV pales in comparison to the potential.

Consider that if a hybrid broadcast-Internet experience can grab part of the almost $40 billion broadcast TV ad pie and the $8 billion cable TV ad pie--which we think it will--then the numbers get compelling very quickly.

That's one reason why AOL may be close to acquiring WebTV rival NetChannel. AOL is about the only real threat Microsoft seems to have as it can leverage its 13 million members into "AOL-TV" and leave WebTV's 100,000 subs behind. For a few months anyway.

Why do you think Microsoft wants to get into cable TV so badly? It invested $1 billion in Comcast, and while no longer a Microsoft employee, Microsoft's original co-founder Paul Allen bought into Marcus Cable recently.

Meanwhile, we expect catalog sales and direct marketing to explode as these natural Web-ready sales channels find the Internet to be the perfect place for the offerings. No more spamblasting the local U.S. Postal Service with junk flyers and hand outs.

While we are far from espousing the paperless future, we estimate that the cost savings and depth of Internet-based sales, with the computing power and convenience intrinsic to the network, will drive this area's explosive growth.

Internet Stock Report's Internet Advertising Projection

Est. Ad Revenue

1998

1999

2000

2001

2002

CAGR**

(billions)

(billions)

(billions)

(billions)

(billions)

Newspapers

$ 40.0

$ 41.2

$ 40.2

$ 39.0

$ 37.8

-1%

Broadcast TV

$ 38.0

$ 40.7

$ 43.5

$ 42.4

$ 42.4

3%

Direct Mail

$ 35.0

$ 36.4

$ 35.8

$ 34.0

$ 32.3

-2%

Yellow Pages

$ 12.0

$ 12.6

$ 11.0

$ 10.3

$ 10.0

-4%

Radio

$ 14.5

$ 15.0

$ 14.8

$ 14.5

$ 14.2

0%

Magazines

$ 9.4

$ 8.7

$ 9.0

$ 8.9

$ 8.7

-2%

Business Publications

$ 4.8

$ 5.2

$ 5.0

$ 4.8

$ 4.5

-2%

Cable TV

$ 8.1

$ 8.5

$ 8.4

$ 8.1

$ 8.0

0%

Outdoor

$ 1.8

$ 1.9

$ 1.9

$ 1.9

$ 1.9

1%

Farm Publications

$ 0.4

$ 0.4

$ 0.3

$ 0.3

$ 0.3

-4%

Misc.*

$ 20.0

$ 21.2

$ 20.8

$ 19.8

$ 19.4

-1%

Internet (PC)

$ 1.2

$ 3.6

$ 8.1

$ 11.3

$ 15.9

91%

Hybrid webTV

$ 0.0

$ 0.8

$ 2.6

$ 4.2

$ 5.9

94%

Web appliances

$ 0.0

$ 0.0

$ 0.5

$ 0.8

$ 1.1

50%

TOTAL

$ 185.2

$ 196.1

$ 202.0

$ 200.3

$ 202.5

2%

AVERAGE

$ 13.2

$ 14.0

$ 14.4

$ 14.3

$ 14.5

2%

INTERNET TOTAL

$ 1.2

$ 4.4

$ 11.2

$ 16.3

$ 22.9

108%

Internet % of total

0.7%

2.3%

5.5%

8.2%

11.3%

*Weeklies, shoppers, pennysavers, bus & cinema ads; ** Compound Annual Growth Rate;

) 1998 Mecklermedia Corp.,
The Internet Media Company (NASDAQ:MECK)

You need go no further than RealNetworks (NASDAQ:RNWK), CDnow (NASDAQ:CDNW), N2K (NASDAQ:NTKI), Amazon.com (NASDAQ:AMZN), and others to realize that the Internet is taking on characteristics of radio, music, and publishing industries.

In audio, for example, not only can you listen--albeit at poor quality compared to CD--but we foresee when listening will be a crystal clear experience and buying and burning a writable disc drive may be commonplace.

Given the Internet's ramp to more than 20% of U.S. households and some 115 million people globally, the hyper development of solutions for faster and more mixed media delivery, we foresee the year 2000 as a turning point of mass media "invisibleness."

In short, we think the Internet will become so common to the everyday lives of millions of people that they will take it for granted just as TV and radio are today. You know something is beyond critical mass when you don't even think about it but take it for granted.

Further, in the year 2000 we forecast about 40% of U.S. households will be on the Internet. That's roughly 40 million households and a multiplicity of Internet-enabled devices including cell phones and Palm Pilot-type devices to make the Internet portable, IP-based telephony, e-mail, and multi-user video games.

Given the hardware personalities, that translates into more time spent using the Internet as the "touchstone" for 21st century entertainment, information, and communication. If so, other mediums that ignore this do so at their own peril.



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