Myers: Online Advertising to Grow 30 Percent in '05

  |  December 22, 2004   |  Comments

Forecast cites video and behavioral targeting as key growth sectors.

Online advertising will grow by 30 percent next year from $7.8 billion in 2004 to $10.2 billion in 2005, a rate reminiscent of the late nineties when the medium was in its infancy, according to the Jack Myers 2005 Spending Forecast.

In contrast, Myers projects that overall advertising will grow at a more modest 4.8 percent from $181.5 billion in 2004 to $190.2 billion in 2005.

"Most offline advertising has reached a state of what I would call parity, where the major players are all spending roughly the same amount as their competitors," Myers said. "Online is seen as the place to seek for a competitive advantage for a comparatively low amount of spending."

Still, Myers predicts that online advertising will command just a 5.3 percent share of all ad spending, as compared with 4.3 percent in 2004.

Key drivers of online growth include video advertising, content sponsorship and behavioral marketing, all of which Myers puts in the 40 percent growth category for next year. Search engine advertising will continue to be hot, with growth of 25 to 30 percent. "But even traditional banner and pop-up ads will experience 20 to 25 percent increases," Myers added.

He attributes part of the online surge to major national advertisers shifting their budgets away from Web site development, research and development, and IT infrastructure into online media. Advertisers are also shifting funds to Web sites developed by traditional media suppliers such as ESPN, the Wall Street Journal, the New York Times, Condé Nast, local newspapers, and local TV stations.

"The Web sites of traditional media companies will be big beneficiaries of this growth," Myers said.

While Yahoo, AOL, and MSN will benefit from "a significant share" of ads aimed at broadband users, their growth from traditional online media will be under 20 percent, the report predicts.

The Myers forecast contrasts with the December report by Universal McCann's SVP Robert Coen. In that report, Coen predicted that online would grow at a slightly less aggressive 25.0 percent in 2005. Coen, however, was more robust with his prediction for overall advertising growth next year, which he pegged at 7.4 percent.

"I think Coen was overly bullish on the growth of the general economy in a post-quadrennial year, coming off a very strong 2004 that included the Olympics and a presidential election," Myers said.

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