www.emarketer.com Online Advertising Update: A Review of Research Data Measuring the Growth and Effectiveness of Online Advertising in the US March 2002 This report is the property of eMarketer, Inc. and is protected under both the United States Copyright Act and by contract. Section 106 of the Copyright Act gives copyright owners the exclusive rights of reproduction, adaptation, publication, performance and display of protected works. Accordingly, any use, copying, distribution, modification, or republishing of this report beyond that expressly permitted by your license agreement is prohibited. Violations of the Copyright Act can be both civilly and criminally prosecuted and eMarketer will take all steps necessary to protect its rights under both the Copyright Act and your contract. If you are outside of the United States: copyrighted United States works, including the attached report, are protected under international treaties. 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For more information, or to order any of eMarketers’ products, visit http://www.emarketer.com. You can also e-mail us at sales@emarketer.com, or call at 212.677.6300. ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 3 Online Advertising Update Table of Contents 3 I Growth Projections for Online Advertising 5 A. US Online Advertising Spending 6 B. Online Spending in Comparison with Other Media 8 II 4 Reasons for Online Ad Growth 11 A. Number of Internet Users Is Growing 12 B. Increased Broadband Penetration 13 C. More People Shopping and Buying Online 16 D. Resolving Online Standards and Measurements 17 A. Overall Online Demographics 18 III A Look at Who’s Online and How Much Time They Spend 19 B. Heavy User Groups 21 A. Overview: What Are Your Objectives? 29 IV How Online Advertising Gets Results 31 B. Direct Response 32 C. Branding 36 D. Cost-Effectiveness 44 V Conclusion 47 Index of Charts 49 March 2002 A Letter from James Spanfeller, President and CEO, Forbes.com “Water, water everywhere Nor any drop to drink.” –Samual Taylor Coleridge The interactive advertising industry is awash in data. The datamining opportunities made possible by Web technology have been both a boon and a bust. There is too much data and not enough perspective on the data that matter. Making sense of it all is akin to drinking from a fire hose. It’s not easily accomplished. Until now! We’re pleased to present you with the definitive overview of the available research covering the online advertising industry, developed and vetted with the valuable insights from eMarketer—the premiere source for data regarding the Web. Here you’ll find only the most salient and actionable data from a host of research sources that serve to define the online advertising industry and its value to marketers. The data is in. The proof is persuasive. The Web is a powerful communication tool that more and more smart advertisers are using to their competitive advantage with each passing day. Of particular note is the new and exciting research regarding the Web and the affluent and senior management markets. The data show that the more affluent and the more senior the manager, the more valuable the Web becomes to marketers challenged with reaching and influencing busy business professionals. For example: ■ CEOs spend more time on the Web than they do with any other medium. ■ The Web is the medium of choice for affluent investors. ■ The Web is emerging as the “prime-time” medium for reaching business professionals during the workday. Read through the rich data presented in this first-of-its-kind Whitepaper on the trends in online advertising and consumer attitudes towards the Web. We’re confident you’ll find it a valuable and refreshing reference resource. Sincerely, James Spanfeller President and CEO Forbes.com Inc. Reuse of information in this document, without prior authorization, is prohibited.If you would like to access related reports from eMarketer, please contact David Iankelevich at diankelevich@emarketer.com, or 212.763.6037. ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 4 Online Advertising Update James Spanfeller President and CEO Forbes.com Inc. I I Growth Projections for Online Advertising 5 A. US Online Advertising Spending 6 B. Online Spending in Comparison with Other Media 9 II 4 Reasons for Online Ad Growth III A Look at Who’s Online and How Much Time They Spend IV How Online Advertising Gets Results V Conclusion Index of Charts ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 5 Online Advertising Update ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 6 Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts A. US Online Advertising Spending The year 2001 was challenging for the entire US advertising industry, online as well as offline. The depressed economy, compounded by the after effects of September 11 th , created a retraction in media spending not seen in 30 – 40 years. Yet the worst, most experts believe, is behind us. The US online ad market is due for an expansion. eMarketer foresees an 11.0% bounce-back in 2002, to counter the 11.0% drop seen in 2001. In absolute dollars, online ad spending will rise from $7.3 billion in 2001 to $8.1 billion by the end of this year; and by 2005, the industry will grow 67% to reach $13.5 billion by 2005. Note that eMarketer benchmarks it’s online ad spending projections based on reported figures from auditing firm PricewaterhouseCoopers, which conducts independent quarterly surveys on behalf of the Interactive Advertising Bureau (IAB). There are nearly two dozen research firms, ad agencies and investment banking firms that make estimates and predictions for online ad spending. However, even for historical periods, including 2001, there is little consensus among them. The discrepancies are due to differing definitions, methodologies and biases. US Online Advertising Spending, 1996-2005 (in billions) 1996 $0.27 1997 $0.91 1998 $1.92 1999 $4.62 2000 $8.20 2001 $7.30 2002 $8.10 2003 $9.20 2004 $11.40 2005 $13.50 Note: eMarketer figures for future forecasts (2001-2004); Interactive A dvertising Bureau (IAB)/PricewaterhouseCoopers figures for historical p eriod (1996-2000) S ource: eMarketer, February 2002; Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers, 2001 036859 ©2002 eMarketer, Inc. www.eMarketer.com ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 7 Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts For 2002, though, most researchers and Wall Street firms are expecting healthy growth in the range of 10-30%. Comparative Estimates: Projections for US Online Advertising Spending Growth, 2002 (as % increase/decrease vs. prior year) McCann Erickson, December 2001 -14.2% Morgan Stanley, November 2001 0.0% Yankee Group, 2001 3.5% Goldman Sachs, December 2001 4.1% Rishad Tobaccowala (CEO of Starcom IP), November 2001 5.5% Veronis Suhler, July 2001 8.0% Lehman Brothers, November 2001 10.0% Smith Barney, September 2001 10.2% eMarketer, December 2001 11.0% Merrill Lynch, September 2001 12.3% Fortune Survey*, November 2001 12.5% Myers Group, October 2001 12.8% Zenith Media, September 2001 13.0% Adams Media Research, May 2001 18.4% Jupiter Research, November 2001 19.3% International Data Corporation (IDC), November 2001 20.5% Forrester Research, November 2001 23.3% Gartner G2, December 2001 44.3% Note: *November 2001 Fortune survey of ad agency executives indicated that online ad dollars will rise by no more than 10-15% in 2002 Source: eMarketer, January 2002; various, as noted, 2001 036190 ©2002 eMarketer, Inc. www.eMarketer.com ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 8 Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts In addition to the internet, other digital media channels, such as interactive television (iTV), are predicted to show sharp growth in the coming years. To get more information and stats on iTV and related market trends, see eMarketer’s iTV Report, at: www.emarketer.com Comparative Estimates: US iTV Advertising Revenue, 2001 & 2005 (in millions) 2001 2005 Myers Group $20 $215 Forrester Research $127 $2,622 Jupiter Research – $4,500 ABN AMRO $105 $8,269 S ource: eMarketer; various, as noted, 2001 034865 ©2001 eMarketer, Inc. www.eMarketer.com ©2002 eMarketer, Inc.Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published,publicly available information. 9 Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts B. Online Spending in Comparison with Other Media Online advertising’s percentage of total US media spending will grow slowly but steadily over the four-year period between 2001 and 2004. As compared with traditional media, the internet is expected to show relatively strong growth in 2002. Most research firms estimating ad spending for the major US media of television, radio, print and the internet, place online at the head of the growth curve. The Myers Group, PricewaterhouseCoopers and Zenith all predict online spending to grow by about 13.0% in 2002, exceeding all or most other major media. US Online Advertising Spending, 2000-2004 (as a % of total media spending) 2000 3.2% 2001 2.9% 2002 3.1% 2003 3.5% 2004 3.8% Note: Measures online advertising as a % of total US media spending, including direct mail, based on media figures from Veronis Suhler, July 2 001; and direct mail figures from Robert Coen of McCann-Erickson S ource: eMarketer, December 2001 034927 ©2001 eMarketer, Inc. www.eMarketer.com Comparative Estimates: Projected US Ad Spending, by Major Media, 2002 (as % change from 2001) TV Radio News- papers Magazines Internet Myers Group -0.3% -2.0% 1.0% -2.0% 12.8% Pricewaterhouse- Coopers LLP (PwC), Wilkofsky Gruen Associates 11.1% 9.0% 5.4% 8.1% 13.0% Universal McCann 4.4% 0.8% 0.8% -1.0% -14.2% Veronis Suhler 8.7% 9.5% 4.6% – 8.0% Zenith Optimedia 0.3% 0.6% -4.0% -6.0% 13.0% S ource: eMarketer, January 2002; various, as noted, 2001 & 2002 036194 ©2002 eMarketer, Inc. www.eMarketer.com [...]... available information Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts D Resolving Online Standards and Measurements One of the long-time problems with online advertising has been standards and measurements, or rather a lack thereof Recognizing... they shop, as they shop, with ads targeted to their indicated interests And even when people choose not to make the actual purchases online, they often initiate their shopping on the internet and then complete it of ine The number of US online buyers will increase as a share of all internet users from 53.2% in 2001 to just shy of 60% by 2004, when there will be 90 million people purchasing online And. .. e-commerce and internet advertising alike is the increased adoption of broadband access Simply put: the faster pages load, the more people spend time online, the more they do, and the more they view The number of broadband households in the US will rise from 11.4 million last year to 34.7 million by 2004 By that year, broadband’s share of total US online households will reach nearly 45% Broadband Households.. .Online Advertising Update I II II Growth Projections for Online Advertising 4 Reasons for Online Ad Growth 11 A Number of Internet Users Is Growing 13 B Increased Broadband Penetration 14 C More People Shopping and Buying Online 17 D Resolving Online Standards and Measurements 18 III A Look at Who’s Online and How Much Time They Spend IV How Online Advertising Gets Results V Conclusion Index of. .. Results Conclusion Index of Charts A look at the market fundamentals, and the supporting market research data behind them, indicates that online advertising is destined to grow over the next several years In the US, and around the world, we will see a growing number of internet users, including upper-income professionals who tend to spend more time and money online More of these users will be accessing... published, publicly available information Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts C More People Shopping and Buying Online With more people making more purchases online, advertising to them through the same media will become a “no-brainer”... this report (other than that sourced as eMarketer) was obtained from published, publicly available information Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts A Overall Online Demographics The Department of Commerce, in their just-released... permission Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results Conclusion Index of Charts B Increased Broadband Penetration Another truism that... all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend How Online Advertising Gets Results B Heavy User Groups The internet offers some attractive target groups for advertisers The. .. all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information Online Advertising Update Growth Projections for Online Advertising 4 Reasons for Online Ad Growth A Look at Who’s Online and How Much Time They Spend Attitudes of US At-Work Users Towards Advertising, by Media Type, 2001 (as a % of at-work users*) Internet 57% How Online Advertising . www.emarketer.com Online Advertising Update: A Review of Research Data Measuring the Growth and Effectiveness of Online Advertising in the US March 2002 This report is the property of eMarketer, Inc. and is. and internet advertising alike is the increased adoption of broadband access. Simply put: the faster pages load, the more people spend time online, the more they do, and the more they view. The. most salient and actionable data from a host of research sources that serve to define the online advertising industry and its value to marketers. The data is in. The proof is persuasive. The Web is