To illustrate the explosive growth of online advertising and
interactive marketing over the last few years, AdRelevance has culled facts and figures from leading research firms and
publications. For additional information and research support, e-mail us.
Who's advertising on the Web?
Online advertising revenues hit $1.92 billion in 1998, more than double the $907 million spent in 1997.
Total online ad revenues in 1998 surpassed the $1.58 billion spent on outdoor advertising the same year.
Many large corporations are using the Internet to advertise their products. For example, Procter & Gamble now advertises
30 brands online - three times as many as it did only a year ago.
Analysts predict that online ad spending by U.S. companies will increase to $2.6 billion by year-end 1999 and $8.9 billion
by 2002.
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Where are ad dollars coming from and where are they going?
The concentration of companies placing online ads is becoming more spread out. In 1996, the top 25 advertisers accounted
for nearly 40 percent of all Web-based ad spending. But by 1998, the top 25 accounted for only 24 percent.
According to Forrester Research, 70 percent of advertisers spent less than $1 million on Web advertising in 1997. By 2001,
the same percentage is expected to spend more than $1 million each.
Over the next few years, an increasing percentage of online ad dollars is expected to go to highly targeted "vertical" Web
sites oriented to a particular audience. Although broad portal sites attracted 59 percent of all Web advertising in 1998,
Forrester predicts that by the year 2002, portals will garner only 30 percent of online ad revenue.
Based on previous distributions of online ad spending, Web publishers and content providers are expected to attract ad revenues
in 1999 according to the following: - Portals (e.g., AOL, Yahoo, Excite) - 49 percent
- Niche content sites (e.g., PC World, c|net) - 20 percent
- General content providers (e.g., WSJ, Forbes) - 18 percent
- Other - 13 percent
Categories leading online ad spending are: - Consumer-related - 29 percent
- Computing - 20 percent
- Financial services - 19 percent
- Telecom - 8 percent
- New media - 7 percent
Ad agencies are expanding their interactive marketing and media services in order to provide more resources for their clients.
For example, Interpublic, the world's third-largest agency with estimated billings of $30 billion, recently invested in
Stockholm-based Icon Medialab International, the largest independent Internet services and consulting company in Europe.
Forrester Research predicts that revenues from advertising, subscriptions and transactions fees will grow to $8.5 billion
within five years, or almost 5 percent of the $175 billion advertisers spent in newspapers, TV, radio, direct mail, billboards
and other traditional media in 1996.
What standards are in place for online advertisers?
The Internet Advertising Bureau (IAB) was founded in 1996 to evaluate and recommend standards and practices, encourage
research and educate the advertising industry about the use of online advertising.
The Future of Advertising Stakeholders (FAST) recently published guidelines for Internet advertisers and publishers
on three topics:
1) How to protect consumer privacy;
2) How to create standard size and placements for ads; and
3) How to measure how many people view an ad.
Both FAST and the IAB aim to establish de facto standards, such as those used in print and broadcast, to help
advertisers and publishers settle on common methods for creating ads and measuring results.
Are there effective ways to measure ROI?
Despite increased online ad spending, large corporations are still unsure about how to measure ROI.
68 percent of companies surveyed by the Association of National Advertisers said that a "key barrier" to
advertising online was an inability to measure return on investment.
Forrester Research reports that only 16 percent of advertisers are currently satisfied with online ad measurements.
What kind of advertising is being viewed online?
Banner advertising was the first form to receive widespread acceptance on the Internet. Banner ads are generally
understood to be 468x60-pixel rectangles displayed horizontally across the screen.
Banner advertisements continue to be the dominant type of advertising, accounting for 56 percent of online ad
revenues. Other formats include sponsorships (30 percent), interstitials (5 percent) and e-mail (1 percent), with
a remaining eight percent miscellaneous.
Although most online ads are simply static displays using GIF, JPEG and HTML technology, a new generation of
advertisements are leveraging the interactive nature of the Web by using Java, Shockwave, RealAudio, QuickTime
and VRML technologies.
How fast is the Web growing?
The Internet's pace of adoption eclipses all other technologies that preceded it. Radio was in existence for
38 years before 50 million people tuned in; TV took 13 years to reach that benchmark; and the PC took 16. In contrast,
once the Internet was opened to the general public, it crossed the 50-million-user mark in only four years.
In July 1995, only 10 percent of the ads in BusinessWeek, Fortune, Newsweek and Time contained a URL. By July
1998, the percentage had reached 91 percent.
Since 1994, traffic on the Internet has been doubling every 100 days.
As of December 1996, about 627,000 Internet domain names had been registered. By the end of 1997, the number of
domain names had more than doubled to reach 1.5 million.
Fewer than 40 million people around the world were connected to the Internet during 1996. By the end of 1997,
more than 100 million people were using the Internet. Some experts believe that one billion people will be connected
to the Internet by 2005.
How have media and content developers adapted to the Web?
More than 2,700 newspapers have online businesses. Of that number, more than 60 percent are U.S.-based.
All but three of the top 50 magazines in the country (as defined by paid circulation) had a Web presence as of January 1998.
More than 800 TV stations across the United States have Web sites.
Nearly 90 percent of Web users go online to get news and information, finding everything from limited-edition journals
to top-selling, mass market magazines.
Recent studies indicate that as use of the Internet increases, television viewing decreases.
New York-based Find/SVP reported that more than 60 corporations, ranging from Warner Brothers and PacTel to NBC and U.S.
West, have launched Web sites with a strong emphasis on local content.
References
Internet Advertising Bureau, May 3, 1999, "Internet Advertising Revenues More Than Double in 1998," from a report conducted
by the New Media Group of PriceWaterhouseCoopers.
The New York Times, May 4, 1999, "Mixed News at Online Ad Conference."
eMarketer, April 1999, "The E-Advertising Report."
The New York Times, March 25, 1999, "Three Major Ad Agencies Expand Internet Efforts."
Forrester Research, November 1997, "Valuing On-line Audiences"; August 1997, "Branding on the Web."
CASIE, 1998, "Suggested Guidelines for Banner Advertising."
U.S Department of Commerce, 1999, "The Emerging Digital Economy," http://www.ecommerce.gov/emerging.htm.
Interacumen Communications, 1998.
Inktomi Corporation, 1997, White Paper.
Network Solutions, Inc., February 1998.
Number of Online Newspapers on the World Wide Web as of March 1998, http://www.mediainfo.com/ephome/npaper/nphtm/stats.htm.
Advertising Age, "Top magazines by paid circulation: six month averages ended June 30, 1997." Figures compiled by the Audit Bureau of Circulations and BPA International.
E&P Interactive, October 17, 1997, "First Profitable TV Web Site."
Advertising Age, October 6, 1997, "Information still killer app on the Internet."
News.com, March 30, 1998, "Study: Net use eclipsing TV."
MediaInfo.com, September 1997, "The City Guide Wars: Free For-All Over Local Advertising."
