Studies: Price Rise Fuels Online Ad Increase

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Online advertising grew 2.5 times as fast as overall U.S. advertising in the first three quarters of 2004, according to data released by TNS Media Intelligence/CMR.

Online advertising in the U.S. totaled $5.59 billion for the first three quarters of this year, up 25.8 percent over the $4.45 billion measured over the same time period in 2003. That growth was well ahead of the year-over-year increase of 10.3 percent in overall U.S. ad spending to $102.47 billion from January through September, from the $92.90 billion spent in the same time period in 2003. The figures come amid other signs of stabilization within the online advertising market in recent weeks.

Other U.S. advertising sectors that registered double-digit growth in the first three quarters of 2004 included: outdoor advertising (17.6 percent); nationally syndicated advertising (17.3 percent); cable television advertising (16.1 percent); network TV ad spending (14.0 percent); local magazine ad spending (10.3 percent); and consumer magazine advertising (10.0 percent).

"Throughout 2004, the advertising market has experienced steady, healthy growth with increases in all three quarters," said Stephen Fredericks, chief executive of TNS Media Intelligence/CMR.

The TNS numbers are consistent with projections made by JupiterResearch, which expects an overall increase of 27 percent in online advertising across all four quarters this year, said Nate Elliott, an analyst with the firm. JupiterResearch forecasts the same growth rate in 2005, and 15 percent overall year-over-year growth in 2006.

Jupiter separates the growth in online spending this year into three primary sectors, with search advertising leading the way with growth of 34 percent. Online classified spending is second with year-over-year growth of 26 percent. Lastly, display advertising is projected to grow by 24 percent.

Elliott attributed that steady growth to rising ad prices due to the increased demand for and effectiveness of prime Internet advertising real estate of most-searched keywords and the best pages on key Websites.

"Rising prices are the key driver of that growth across all three sectors," Elliott said. "We see strong growth in all three sectors, and that's what's surprising."

Jupiter predicts that all three sectors will continue to grow at a steady pace, with search advertising growing more consistent with the rates of the other two sectors in coming years.