Internet Advertising Grows Despite DotCom Die Off

May 22, 2002
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GRAND RAPIDS — As the Internet solidifies itself as an essential business tool, so too will the buying of space on a Web site to advertise your products soon become commonplace.

In what just two years ago was primarily the domain of dot-coms and Internet-related companies, advertising on the Web is fast becoming mainstream. At a time when more than half the nation has access to the Internet and e-commerce continues to boom, the Internet is one more option for a business to consider when putting together an ad campaign.

“That’s where the customers are going to look for stuff, and that’s where you need to put your advertising. We’re going to see more and more of it,” said Paul Lane, chairman of the Marketing Department at Grand Valley State University’s Seidman School of Business.

Projections for Internet advertising show substantial growth in the years ahead, despite the ongoing purge of dot-coms from the business landscape.

Online advertising will grow from $5.3 billion in 2000 to $16.5 billion in 2005, according to projections from the Internet research firm, Jupiter Communications in Cambridge, Mass. During that period, the Internet will represent the fastest growing advertising segment, accounting for 8 percent of all U.S. ad spending by 2005 and ranking fourth in revenues behind television, radio and newspapers, according to Jupiter.

Another research firm offers a broader look at the future.

New York-based Forrester Research predicts that digital marketing — which combines Web site ads, promotions and e-mail strategies — will grow from $11 billion in 2000 to $63 billion in 2005. In that time, digital marketing will grow to represent 12 percent of all advertising dollars, Forrester predicts.

Driving the growth is the entrance of traditional advertisers into cyberspace. Where dot-coms accounted for 69 percent of digital marketing in 2000, traditional advertisers will represent 84 percent of expenditures by 2005, according to Forrester.

Changing the Internet advertising line-up is the demise of many dot-coms since 1999, the need for Web publishers to create new revenue sources and accept ads on their sites, and the growing acceptance of the Internet as a viable advertising medium.

The transformation indicates that the Internet economy is maturing as a business, as corporations make Web advertising part of their advertising campaigns. So said Jim Barry, vice president of sales for Adtegrity.com, a 16-month-old Internet advertising firm in Grand Rapids. He said corporations now embrace the Internet as a way to make their sales pitch to consumers.

“Corporate America basically now is using the Internet somehow, somewhat, some way,” Barry said. “It’s balancing out. All of your big companies are moving into the Internet space and they do both (Internet and traditional advertising).”

Directing ad dollars toward a specific demographic group is one benefit of Internet advertising, Barry said.

Adtegrity.com represents about 100 Web publishers.

The firm works to link advertisers with clients’ Web sites that meet the advertisers’ desired demographic market, Barry said. Most of Adtegrity’s revenues are generated based on how often an ad posted on a Web site is viewed and how often a person clicks on it, he said.

The need for an advertiser to link with the right Web site in order to reach the demographics they want is one aspect that in many ways makes Internet advertising just like other mediums. To use it effectively you still have to blend traditional business skills, such as marketing and sales, with the emerging medium in order to get the results you want, Lane said.

“You have to be careful in what you want to achieve there and how you want to achieve it,” Lane said. “You have to figure out who’s going to what Web site and who you’re trying to sell to. It’s the same basic stuff we’ve always been looking at; we’re just applying it differently.”

While Barry welcomes the transformation and the rapid growth of Internet advertising, he says the trend does have its drawbacks. Ad rates, for one, have fallen to a fraction of what they were 16 months ago, driven down by the fallout of the dot-coms that spent most of their marketing budgets plastering their names all over the Internet to lure Web-savvy customers to their sites.

“When you’re dot-com, that’s all you are. They needed to be there and they needed to pay what they needed to pay. It’s not that way anymore,” Barry said.

As a new advertising medium, the Internet also still has to prove itself. Advertisers are demanding data that their money is generating results and that their ads are reaching the desired audience.

“It’s under a lot more scrutiny than any other form of advertising you have. They’re holding us accountable for results,” Barry said.

Here are year-to-year increases in online advertising as projected by Jupiter Communications:

2005: $16.5 billion;2004: $14.3 billion;2003: $11.9 billion;2002: $9.5 billion;2001: $7.3 billion;2000: $5.3 billion; 1999: $3.5 billion. 

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