Online Ads to Recover (a Bit) in 2003

NEW YORK — The good news from Jupiter Research: Online ad spending will
more than double. The bad news: It won’t happen for five years.

Following up on the sluggish
second-quarter revenue report
from the Interactive Advertising Bureau
(IAB) yesterday, Jupiter said online ad spending would remain flat this
year, while growing by 10 percent in 2003. In large part, a recovering
economy and low ad prices will encourage advertisers to increase their
spending on Web ads.

McDonald’s will be one such company. After earlier
reporting the
success of its Internet ad campaign
for a new chicken sandwich, the
company’s director of Internet marketing, Neil Perry, told the IAB/Jupiter
Advertising Forum on Tuesday that the Golden Arches would spend 50 percent
more on its
online ad spending next year. Currently, McDonald’s devotes 1 percent of its
total ad budget to online.

“Given the current economy, online ad spending understandably saw a year of
virtually no growth, but the industry is in recovery mode,” said Jupiter
Research Analyst Patrick Keane. (Jupiter Research is a unit of Jupitermedia
Corp., the parent of this Web site.)

In the near term, Keane expects CPM rates to remain low. “This is a buyer’s
market,” he said, “and that’s not changing much at all.”

An especially bright spot is the online classifieds sector, which make up
the overwhelming majority of local online ad spending — representing 91
percent of the $1.2 billion spent on regionally-targeted ads in 2002.

Jupiter forecasts the segment to grow 16 percent, reaching $1.4 billion in
2003. Job recruitment and even matchmaking ads are expected to be some of
the major drivers.

In spite of some well-performing areas, Keane said convincing traditional
advertisers like McDonald’s to increase their online ad spending remains

One reason is that most marketers remain behind the curve in
understanding the usefulness of online
ads. Keane pointed to Jupiter research indicating that 67 percent of
marketing departments still use click-throughs as a legitimate measuring
stick of the performance of their online ads — a practice that many Web advertising insiders believe
ignores the longer-term branding effects of the medium.

Just 35 percent of
marketers take the effort to track branding and predictive behavior, Keane

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