A new study paints a rosy picture for the advertising industry, predicting next year will be a “breakout year” for the industry as a whole and for the Internet in particular.
Global Insight, a Waltham, Mass.-based research firm, said spending on Internet advertising would grow 16 percent next year, coming in at just under $5 billion. Overall, the researcher said the U.S. advertising market would grow by 6 percent next year, to $241.7 billion, after growing 3 percent in 2002 and declining 6 percent in 2001.
With solid growth in the next three years, Global Insight expects the ad market to hit $285 billion in 2006. The top growth area, in percentage terms, will be the Internet, which Global Insight forecasts to grow, on a compounded basis, by 16 percent.
“The whole pie for advertising is growing,” said John Rose, manager of Global Insight’s media practice. “Our view of Internet advertising is very strong. That’s predicated on our view that people are only just now getting their heads around how to make Internet advertising work.”
Rose said better measurement techniques, such as the emerging reach and frequency standards, will help marketers better understand online advertising’s power. In addition, the awareness of interactive advertising in cross-media campaigns will also spur growth, he said.
Global Insight is not alone in calling for robust growth in the Internet ad market. Gartner Group anticipates online ad spending will jump nearly 29 percent next year. Jupiter Research, which is owned by the parent company of this publication, anticipates the industry will grow over 11 percent in 2003.
In 2003, Global Insight expects rebound in the overall ad industry, thanks to recovering corporate profits — the main driver of ad spending — and disposable income growth. With consumers enjoying increased disposable income, Global Insight said they would consume more so-called “value-added media,” which includes the Internet. With more eyeballs come more dollars, Rose said, meaning better CPMs.
“People will see it can be cost-effective and it can be linked to other advertising and other media,” he said. “The issue up till now is people have been talking about it but people didn’t have a lot of experience.”
With all that good news, however, comes the bad: Even with the robust growth, Internet advertising will remain a tiny slice of the media pie, jumping from 2 to 3 percent of overall ad spending in 2006.
“It’s still a relatively small player,” Rose said. “It’s not going to lead to the collapse of newspapers or other media.”