Finding Positives Among The Negatives

If the last quarter of 2002 is any indication, the Internet advertising market could be looking up. Findings from a collaborative report between Interactive Advertising Bureau (IAB) and the New Media Group of PricewaterhouseCoopers (PwC) reveal a 2.3 percent increase in revenue from 3Q 2002 to 4Q 2002 – reflecting the first consecutive quarterly increase since the second quarter of 2000.

“The improved performance over the past two quarters reflects a stabilizing online advertising market, highlighted by continued strength in paid-for-search results. The recent upturn, coupled with forecasts of continued expansion of broadband distribution, bodes well for a strong year in 2003,” said Tom Hyland, chair, PricewaterhouseCoopers New Media Group.

While the $1.5 billion generated in the fourth quarter represents a decrease of 9.8 percent from 4Q 2001, there is a shred of optimism among the comparative figures – it marks the first single-digit year-over-year percentage decrease since the first quarter of 2001. Despite a look at the brighter side of the market, 2002’s $5.95 billion in online advertising revenue was 17 percent less than 2001’s total.

Greg Stuart, president and CEO, Interactive Advertising Bureau, explains the decrease: “Those who monitor the industry know that a few predominant factors contributed to the revenue decline, including the conclusion of some long-term advertising deals.”

Stuart notes that the profitability of online publishers will contribute to increased revenues, and credits them for offering a more manageable, uniform and understandable business proposition than ever before. Coupled with smart, entertaining creative ad content and the proliferation of broadband users, Stuart believes the environment is ripe for industry success.

“In such a volatile economy, we don’t want to see an inflated market – we want to see a mature, level and stable platform, where revenue fluctuations are even with the rest of the advertising business. Based on the mixed results across all media for 2002, that’s what I believe we are seeing here,” Stuart remarked.

Biting at the heels of the battered online industry comes information from Vertis that indicates minimal effects on traditional forms of advertising.

“There has been a significant amount of research published that suggests that the Internet is chipping away at traditional forms of media usage and communication,” said Therese Mulvey, vice president of marketing research at Vertis. “However, the findings of Customer Focus show that although Internet usage has increased by eight percent from 2000 to 2002, consumers’ use of TV, newspapers and radio has increased at a comparative level, and these outlets are still far more popular.”

The study measured a 7 percent increase in newspaper readership since 2000, and ad inserts and direct marketing offers have shown similar gains. For instance, readership of ad inserts among teenage and young adult females increased 13 points to 68 percent from 2000 to 2002.

Mulvey recognizes the importance of the Internet to consumers while stressing the significance of a balanced advertising mix. “The Internet is playing an increasingly influential role in consumers purchasing behavior, but organizations should continue to utilize media based on its own unique attributes in order to have the greatest impact.”

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