Study: Online Advertising to See Growth in 2002, Unlike Most Media

There’s at least some good news for Web advertising firms this year — they’re going to see greater industry-wide growth than other media, according to a new study by Myers Reports.

This year, Myers forecast a ten percent growth in online ad spending, rising to about $4.73 billion. During the next three years, he sees 12 percent, 15 percent and 20 percent annual growth rates. In 2005, Myers predicts another slowing, to 15 percent, before an 18 percent growth spurt in 2006.

That’s versus a four percent decline in ad spending in 2001 across all media, and a further 1.7 percent decline in 2002. The next year should see flat growth, after which Myers predicts annual growth rates of 2.7 percent, 0.9 percent, and 1 percent each year through 2006.

(The slight bump in 2004, Myers says, is attributable to the combined presidential elections and Olympics.)

In predicting that the ad industry will feel the recession’s effects through 2006, Myers’ figures represent a significant step away from his earlier findings, and from other reports by industry watchers. Most leading advertising agencies and media companies, for instance, are predicting a turnaround in fourth quarter, or at the latest, mid-2002.

Not so, says Jack Myers, chief economist at the New York-based research firm. In May, Myers had predicted a 1.5 percent drop in all across-the-boards spending. Now, those numbers are out the window after disappointing results from this year’s efforts by television outlets to move this season’s inventory.

“Having now seen the broadcast and cable upfronts pretty much play out, we are in a position to more thoroughly evaluate what the year-end numbers will look like,” he said. “And those numbers are, in a word, ugly.”

“We see no indications whatsoever that the oft-mentioned ‘fourth quarter turnaround’ will occur, prompting us to issue what is probably the industry’s most bearish forecast for this year as well as the next several years.”

In explaining the reasons for the bearish overall outlook, Myers cited an oversupply of inventory, consolidation among media buyers, and set-backs in the deployment of digital and broadband technologies — which is resulting in slower-than-expected transitions from direct marketing and promotion budgets to advertising media.

While Myers did highlight online media as one of the few segments of growth (network cable and local cable also fared well in his predictions), he did warn against “overly enthusiastic” expectations for the medium.

“We agree that online advertising will have the strongest growth of any medium for the next several years,” he said, “… but the numbers being thrown around by other forecasters for 2001 and beyond are way out of line with reality.”

Earlier this month, Jupiter Media Metrix, for one, predicted a 5 percent growth in online ad spending in 2001, to 5.7 billion — followed by an average 18 percent annual growth rate every year through 2005.

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