Internet Ad Spending Slowed, But Still Grew in 2000

Despite slowing growth in online ad spending, a study by Competitive Media Reporting (CMR) suggests that advertisers continue to embrace Web media with growing budgets.

According to statistics from the Internet unit of CMR, online ads enjoyed a 52.6 percent year-over-year increase in revenues — to $2.9 billion in 2000.

That’s a definite slowdown from the pace of growth from 1998 to 1999, dipping by about 84 percent. But still, there’s good news: online media spending, as a percent of ad spending across all media, rose from 1.75 percent in the first three quarters of 1999, to 3.04 percent in the first three quarters of 2000.

General Motors spent the most on online media in 2000, with an estimated $47.9 million spend. That’s almost double the $24.4 million the company spent in 1999, according to CMR figures.

Microsoft ranked second in 2000 ad spending, with $25.5 million, followed by BankOne ($25.5 million), IBM ($24.3 million) and AT&T ($18.5 million). Only GM and AT&T increased their spending from last year, according to the report; Microsoft, BankOne and IBM reduced their spending by 31 percent, 3 percent and 24 percent, respectively.

Overall, companies in media and advertising — which includes portals, content sites and search engines — spent the most on Web media of any sector, with $542.2 million spent in 2000, up 83.4 percent from 1999. Retail and e-tail firms spent about 73.6 percent more in 2000, or about $510.9 million, while computers and software businesses ($445.7 million; 29.5 percent growth) and financial concerns ($294 million; 36.8 percent growth) also showed an increase in spending.

However, the CMR study — the first from CMR’s interactive division using its new AdNetTrackUS on- and offline ad spend tracker — differs radically from other recent numbers.

Famed Merrill Lynch analyst Henry Blodget recently said he expected 2000 revenue to be about 75 percent greater than 1999, or about $7.9 billion. While that’s 5 percent less than he previously predicted, it’s still well above CMR’s 52.6 percent increase.

But Blodget’s models are based principally on trend data from PricewaterhouseCoopers and the Internet Advertising Bureau’s statistics. And the IAB’s data comes primarily from a survey of about 200 rep firms, while CMR focuses on data directly from their own analysis of more than 300 publishers.

While CMR’s exact methodology is a secret, a spokesperson from the company agreed that both the New York-based IAB, an industry association, and CMR’s own statistical findings concurred on a year of reduced growth.

“It is slowing down, and the mix of who’s doing the advertising, we see shifting,” Bob Scott, vice president of sales for CMRi. “A lot of the revenue coming from the e-companies, from the dot-coms, is falling off fairly significantly, and we’re seeing a back-filling effect from the more traditional advertisers. It is a kind of correction that’s happening.”

“Everybody’s reporting it … but our numbers are historically more conservative,” Scott added.

Interestingly, CMR’s breakdown of the highest-spending sectors also differed significantly from the IAB’s most recent findings. Last quarter, the industry group reported that consumer and retail companies spent about 30 percent of all online ad spending, followed by computing (18 percent), financial services (14 percent), business services (10 percent), and media (11 percent) companies.

Top 5 Sites by Ad Revenue
Rank	Site	2000 Web Ad Revenue	1999 Web Ad Revenue	Percent Change
1.	Yahoo	$442,336,726	$276,199,251	60.2%
2.	Excite	$249,248,846	$162,073,525	53.8%
3.	Lycos	$190,261,291	$114,003,750	75.8%
4.	CNET	$167,309,781	$100,671,750	66.2%
5.	Netscape	$134,623,234	$82,661,915	62.9%
Source: Competitive Media Reporting

Reprinted from internet.com’s Internet Advertising Report.