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 [...]... the range of 1- 3%, or even higher As the auto commercials say, “your mileage may vary.” Others have argued that click-through is a weak or even meaningless measure of an ad’s total impact Site visitors viewing a particular ad, for instance, may not chose to immediately click on it, and thereby take themselves away from the site to which they originally came Instead, they may remember the ad and its... identified so that publishers, agencies and advertisers were all on the same page.” –Greg Stuart, President, Interactive Advertising Bureau The guidelines are based on a PricewaterhouseCoopers study that compiled data and information from 11 participating companies, including America Online, Yahoo! and Forbes.com This group represents the top destination sites, portals, and third-party ad networks and servers... 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 this challenge, the Interactive Advertising Bureau (IAB) — along with an industry consortium of organizations and companies — recently introduced voluntary guidelines that make... 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 How Broadband Changes US Home Internet Usage, January & July 2001 (in millions) Before broadband (January 2001) A Look at Who’s Online and How Much Time They Spend How Online Advertising... the age 14+ group represents roughly 90% of all users according to the August 2000 US Department of Commerce survey; **eMarketer benchmarks its B2C retail revenue figures against US Department of Commerce data, for which the last period measured was Q4 2001; the travel component was formulated based on aggregated data Source: eMarketer, December 2001; various, as noted, 2000 & 2001 034922 ©2001 eMarketer,... criteria since it has measurement capabilities that allow you to identify your heavy user groups and it’s also a highly targeted medium Conclusion Index of Charts Regardless of your goals for an online advertising program, you can learn from recent studies, benchmark stats and forward-looking trends and projections See eMarketer’s Online Marketing and Online Advertising reports, at http://www.emarketer.com... effective with your targeting than with any other medium Consider a case study from telecommunications firm SBC, for their DSL (broadband) product SBC’s agency, RappDigital in Dallas, was given the challenge of helping SBC to acquire new customers for its DSL IP access franchise Rather than rely on standardized communications techniques, RappDigital tailored an online ad campaign to reach three key customer... response Today, most industry experts agree that less than 1% of all web ads get clicked on eMarketer places the current click-through rate at 0.3%, down considerably from the early days of web advertising (circa 1997) when CTRs hovered in the 2% to 3% range Data from Nielsen//NetRatings showed that for a typical week in June, CTRs averaged 0.22% for at-home users and 0.14% for at-work users Average Click-Through-Rate... will be accessing through an always-on broadband connection, allowing for greater interactivity and new possibilities for rich media And as more people get online, the research shows, they spend more dollars Meanwhile, the strides being made by the Interactive Advertising Bureau, to create consistent, universally accepted measurements and standards in the industry, will also contribute to an increase in... 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 drives . eMarketer team. A full schedule of available reports is published on the eMarketer website. ■ eStat Database: The most comprehensive database of e-business statistics, with more than 250,000 data points. 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. 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