Jupiter: Global Online Ad Spending to Reach $28 Billion

Total spending on online advertising will soar to $28 billion by 2005 — up from $4.3 billion in 1999 — but big challenges face online marketers seeking to exploit the medium’s potential, according to a new report issued by Jupiter Communications.

Those hurdles include a continued reliance on regionally-oriented media buying, a lack of adoption of innovative online ad models, and integration issues.

Although it appears that marketing — and online marketing in particular — is growing increasingly global, with opportunities for multi-national brands to craft integrated marketing plans across international markets, most marketers don’t plan that way now and most agencies aren’t organized to operate that way.

Rather than being driven by any particular innovation in online advertising, the growth predicted by Jupiter will mostly be fueled by the increase in the size of the global online population. The company predicts the number of people online will grow from 300 million users to 800 million users in 2005. In fact, the report contends that most companies are ill-prepared to take advantage of the opportunities.

“While the numbers paint a compelling picture for the Web as a global channel for advertisers, there are significant hurdles to making the Internet a superior global communication tool,” said Evan Neufeld, vice president of international research for Jupiter.

“The challenges are commensurate with the opportunities. Brands that can innovate and adapt to the increasingly fragmented media mix online and off-line, realize and overcome traditional inefficiencies in the way in which they communicate with consumers globally will become global winners, as will media companies and agencies that partner with them to achieve these ends. There will be few prizes for second place in the race to be a globally effective brand.”

Neufeld cites differences between the US and European markets as an example of how marketers have failed to adopt a global strategy. While online ad spending totaled $3.5 billion in North America in 1999, the world’s second largest market, Western Europe, got nearly nine times fewer dollars — $0.4 billion. Asia was next, with only $0.2 billion in online ad spending.

Of course, this relative lack of spending in smaller markets means there’s more growth potential. Out of all the major markets, Jupiter predicts that Latin America will experience the strongest growth rate — 68 percent.

Integration across media will also become a big issue, according to Jupiter. The company says players are already failing to integrate campaigns across existing media, and the problem will only worsen as new wireless and interactive TV platforms proliferate.

Jupiter came up with its current figures by looking at public financial filings and interviewing online ad sellers. In putting together its predictions, the company considered the following: current online penetration and usage behavior, future size of audience, Internet commerce potential, off-line advertising spending, media consumption, and supply-side growth expectations.

Global Online Advertising, 1999-2005 (in millions of US dollars)

1999 2000 2001 2002 2003 2004 2005
North America 3,509 5,390 7,444 9,768 12,237 14,623 16,913
Western Europe 434 906 1,535 2,258 3,118 4,111 5,263
Asia 225 502 880 1,375 1,922 2,556 3,324
Latin America 52 127 240 402 628 888 1,168
Australia/New Zealand 24 74 135 208 288 373 462
Other 9 28 61 118 211 351 578
Total 4,253 7,027 10,296 14,129 18,402 22,903 27,708

Source: Jupiter Internet Advertising Model

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