Studies: Asia, U.K. Internet Ad Revenues to Rebound After 2001 Decline

While many are predicting the domestic ad market will continue to see weakness until mid-2002, two new studies suggest that Europe and Asia will see modest expansion after a brief difficult period.

According to research group IDC, traditional marketers will fuel an upswing in the Asian-Pacific online ad market, helping the industry to see year-over-year growth. Revenue from those offline advertisers will bolster online ad firms’ bottom lines while dot-com advertisers continue to fall out of the mix.

“There is still nowhere near enough online advertising revenue out there to go around, and a lot of dot-coms are going to be affected next year,” said Matthew McGarvey, who is senior Internet analyst at IDC Asia/Pacific (which does not include Japan). “Latent consolidation and decreasing CPM rates are still plaguing the market; however, in terms of real market growth and maturity, this year has seen tremendous improvement.”

According to the findings, the amount of revenue generated from dot-coms clients decreased by 34 percent between 1999 and 2000, and is forecast to drop by another 51 percent in 2001.

Alarmingly, the rest of the advertising community has only made marginal contributions to help pick up the slack. According to the study, online advertising in the Asia/Pacific region accounted for a little more than 0.5 percent of total advertising revenue in the region during 2000.

“Education is still the number one problem,” McGarvey said. “Many companies are confusing reach with targeted results, and thus are coming back empty-handed. On the other hand, traditional advertising agencies are becoming more involved in the overall process, which is a sign that companies are starting to view online advertising as a viable and accountable form of advertising.”

That trend will play out during the next several years, in which online advertising in the region is expected to grow from $225 million in 2001 to $702 million in 2004. Among countries in the region, China will experience the greatest growth, bringing in about $350 million in 2004, IDC said.

Similarly, London-based Allegra Strategies is predicting that online media will become a major component of media plans in the United Kingdom — but only after the industry surmounts several current obstacles.

As in Asia, Allegra says that players in the U.K.’s online ad sector are only now starting to come around to pushing the medium’s brand awareness and purchase-influencing capabilities, as traditional media sellers have long been doing.

Additionally, the industry is struggling with managing clients’ expectations, and — especially in the wireless arena — gaining consumers’ permission to market to them, according to the firm’s study.

But once the industry has a better hold on those issues, Allegra said, the medium will show rapid growth. Interactive advertising revenues — including Web media, email and wireless — will grow by 51.8 percent yearly, according to the study, from about $222.7 million in 2000 to about $1.8 billion by 2005.

As a result, new media advertising is expected to account for 6.7 percent of total U.K. ad revenues by 2005.

While online advertising currently represents the lion’s share of interactive marketing spending — bringing in roughly $200 million during 2000 — Web ads will take in only $641.5 million by 2005.

E-mail marketing, on the other hand, is expected to explode, with revenues growing from $16.8 million in 2000 to $535.1 million by 2005 — a 98 percent compound annual growth rate. By 2005, email will represent 15 percent of the U.K.’s direct marketing spending.

Likewise, Allegra is predicting that wireless advertising revenues will balloon from about $6.5 million in 2000 to about $614.9 million by 2005 — a staggering compound annual growth rate of 156 percent.

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