Dot-Coms, Press to Blame for Ad Market Negativity

There might be cause for greater optimism about the future of online ad spending, according to a report by Myers Reports that forecasts a coming increase in Web media spending.

The report, “Media Recession 2001: Real or Self-Fulfilling?“, predicts an ad spending rebound in the fourth quarter of 2001 and states that the recent wave of dot-com failures and disappointing earnings reports are blamed too often on an ad spending slowdown.

Based on a survey of about 100 ad agency executives, the report found that advertisers are likely to spend more during the next 12 to 18 months than they did in 1999 — at the height of the media economic boom.

Overall, the report concluded that much of the decline in online and offline ad spending has been caused by predictable, cyclical factors — and blamed the press for blowing it out of proportion.

“Much of the consternation and fear of a sustained recession in the media industry is the result of overly aggressive and misinformed press reports,” said Jack Myers, chief economist at Myers Reports. “We believe the media economy is merely experiencing a cyclical hiccup in what will be a period of sustained economic growth.”

But the media are not the only culpable parties. According to the report, floundering dot-coms are reinforcing the public’s negative perception of the ad marketplace — by focusing on it as the cause of layoffs and under-performance.

“Instead, they should be laying the blame squarely on the shoulders of inexperienced and incompetent management and investors who created unrealistic expectations for an emerging and mostly unproven medium,” Myers said.

Myers also said he believes the downturn in media spending this year is likely to be followed by a continuation of long-term media industry expansion, beginning in the fourth quarter of this year.

That jibes with forecasts by Internet advertising leaders like Yahoo and DoubleClick, which have both publicly predicted continued softness in the ad market through at least mid-2001.

Myers also projected that online ad spending would grow to about $8.1 billion, a hair greater than predictions by leading financial analysts like Merrill Lynch’s Henry Blodget, who recently predicted no year-to-year growth.

The report concluded that the “dramatic implosion” of the Internet economy during the past several months has been “a healthy purging — not of companies — but of investors and executives who have little knowledge of the industry and even less ability to judge good competitive ideas and real consumer value.”

If accurate, the report bodes well for the future of many online ad firms, many of which are nearly running on empty when it comes to cash.

For one, CMGI’s ad network Engage is expecting profitability sometime late 2001 — almost at very the moment its cash is expected to run out. Whether Engage and other firms that are heavily dependent on media sales can survive that make-or-break point is still unclear — but Myers’ report, at least, seems to be a source of some optimism for the online ad industry.

Reprinted from internet.com’s Internet Advertising Report.

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