Slowdown in Online Ad Growth Predicted

The rate of growth in online advertising will slow during the next five years, but it will reach 13.3 billion in the US by 2003, according to eMarketer.

Spending on Web advertising in the US will grow from $3.1 billion in 1999 to $4.82 billion in 2000 and $13.3 billion by 2003, according to a study by eMarketer.

The eAdvertising Report Volume II predicts a slow ramp-up of online advertising spending even though total dollar figures will continue to increase through 2003.

“The year-to-year increases that occurred in 1997 and 1998 are not sustainable,” said eMarketer Statsmaster Geoffrey Ramsey. “As the base gets bigger, the rate of growth in online advertising will slow during the next five years. Looking ahead to 2003, projected online ad revenues of $13.3 billion will still represent only 4.7 percent of total advertising expenditures, which are expected to top $285 million.”

Other findings of the report include:

• The top 10 online advertisers spent 11 percent of total ad dollars in 1999, while the top 25 spent 19 percent and the top 50 spent 27 percent.
• Search/New Media Content properties (24 percent) and computer-related products and services (24 percent) are buying the largest portion of Web ads in the US
• Computer hardware and software advertisers are also spending heavily on the Internet as they’re a natural fit for the Web audience
• Consumer package goods marketers are now beginning to divert more of their massive ad budgets toward online advertising

The report also stresses that while the Internet is experiencing rapid growth, it will never totally supplant advertising in traditional forms of media.

“Online marketers will still rely on other, offline media to create awareness, build and promote their brands, and drive traffic to their Web sites,” said eMarketer Publisher Sam Alfstad. “The Net is merely one tool, with specific strengths and weaknesses, in the overall advertising mix.