May 5, 2005

According to a new report published by Forrester Research, and based on the recent numbers and the latest marketing trends analyzed by experts confirm Internet advertising is getting more and more spending budgets.

On the heels of last week's IAB 2004 online advertising numbers, which showed that US online advertising grew 32.5% in 2004, followed by eMarketer's prediction that online advertising will rise by nearly 34% in 2005 to about $13 billion, Forrester upped the ante, estimating that total US online advertising and marketing spending this year will reach $14.7 billion.

Forrester analyst Charlene Li noted that, even though online ad spending is growing at a rapid clip, marketers may still be underplaying the online channel.

"There is a large disparity between the amount of time consumers are spending online and the money marketers are spending trying to reach them online," she said.

"When at-work Internet use is taken into consideration, online consumers spend more than one-third of their time online — roughly the same amount of time they spend watching TV. Yet marketers spend only 4% of ad budgets online versus 25% on TV."

Forrester surveyed 99 leading marketers, who said that online advertising channels such as search engine marketing, online display ads and e-mail marketing will continue to become more effective relative to traditional channels. And they are putting their money where their mouths are.

Nearly 85% of the advertisers told Forrester that they plan to increase their online ad budgets this year, with the increases averaging 25%. Almost half of them plan to decrease spending in traditional advertising channels like magazines, direct mail and newspapers to fund the increases in online ad spending.

Additional findings from the report include:

--- Search engine marketing will grow by 33% in 2005, reaching $11.6 billion by 2010.

--- Display advertising, which includes traditional banners and sponsorships, will grow at an average rate of 11% over the next five years to $8 billion by 2010.

--- New advertising channels drew advertiser interest: 64% of respondents are interested in advertising on blogs, 57% through RSS and 52% on mobile devices, including phones and PDAs.

--- Marketers are quickly losing confidence in the effectiveness of traditional advertising channels and feel that online channels will become more effective over the next three years.

--- 78% of respondents said they think search engine marketing will be more effective, 53% of respondents said TV advertising would become less effective.

The only non-digital advertising channel to reach the same level of confidence as online channels with marketers is product placement — only 8% of respondents believe that product placement will become less effective over the next three years.

Source: C-Net News