Study: European Online Ad Market Growing

The Western European online ad market is slated to almost triple in revenue over the next five years — though less and less of that income will come from banner ads and e-mail marketing, according to a new study by the Yankee Group.

The report, issued this week, predicts that Europe’s Web ad industry will rake in about $1.5 billion during 2001, and about $4.2 billion in 2006. But banner ads, the mainstay of current online advertising, is expected to decline as a component of that income. The Yankee Group said it’s expecting banner advertising’s proportion of Europe’s Internet ad revenues to slide from 53 percent this year, to 40 percent in 2006.

Analysts said they believe that expansion in e-mail marketing would account for a large portion of that decline — at least initially. But e-mail too is expected to become less important, as growing levels of spam annoy consumers and degrade e-mail as a marketing channel.

“While direct e-mail marketing seems like a no-brainer for many marketers today, online consumers are likely to find this method of advertising objectionable, as many do now with direct mail — effectively junk advertising online,” said the Yankee Group’s Scott Smith.

In lieu of banners and e-mail, Smith — who is director of the Yankee Group’s Internet Strategies Europe unit, which compiled the report — said he anticipates that marketers will be spending most of their money through unified, multi-channel campaigns.

“With banner ad revenue now being concentrated among an increasingly smaller group of major portals, and most present interactive ad techniques spotty, uncoordinated, and bandwidth-heavy … a new, comprehensive strategy is necessary to each consumers where they will be in the future,” he said. “This means tying [interactive TV], mobile, and PC-based Internet together with unified creative techniques.”

Smith’s group is predicting that marketers will be encouraged to transition their spending to multi-channel promotions by the same groups that currently lead banner ad spending — the Web portals.

Publishers like MSN, Yahoo! and AOL have a reputation for helping marketers negotiate the ins and outs of an online media buy, offering new and unique ad units to traditional advertisers (for instance, Yahoo! recently featured a front-page rich media ad for the new Ford Explorer.) And as the big portals increase their own efforts in emerging media, they’ll encourage their advertisers to make the transition to multi-channel interactive efforts.

The portals “have been successful in guiding advertisers through the minefield of interactive advertising themselves, thus gaining a foothold in non-interactive marketing budgets,” Smith said. “This technique of proactively guiding the advertiser will increasingly need to be applied by other aggregators if they hope to grow their ad income.”

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