Online Ad Revenue To Reach $15 Billion By 2006

By: Andrew Gordon (Adweek Magazines' Technology Marketing) The tech industry's online ad woes will wane by 2006, reaching $15 billion, predicts a new study from Jupiter Media Metrix. But don't look for the rebound to begin this year, as ad sales will continue to lag, with an increase of a meager 5% in ad spending.

To reach that $15 billion prediction, ad sales will need to grow at a rate of 22% over the next five years. The industry can also take heart in another Jupiter prediction, that spending on non-advertising digital marketing -- such as e-mail, promotions, and coupons -- will swell to $19 billion by 2006.

"Marketers' inability to evaluate online advertising effectively has led to the current hiccup in spending," said Jupiter senior analyst Marissa Gluck, in the study. "Online advertising, when fully measured, remains a strong impetus of consumer action, including increasing traffic and sales, inspiring loyalty, and promoting referrals. While reduced financial resources is still a key factor inhibiting the growth of online advertising, the primary online advertising industry stimuli are still around and will be."

Other findings in the study conclude that online advertising will account for 7% of all advertising in 2006, up from 3% this year. And the biggest spenders of ad dollars offline will become the biggest spenders online by 2006, with financial services companies leading the way by spending approximately $2.1 billion for online advertising. Automotive will follow with $2 billion, and media companies with $1.6 billion.

"Currently, the online advertising industry is more mature than digital marketing initiatives such as sweepstakes, coupons, and promotions," Gluck said. "However, as marketers demand a greater impact from their online investment, publishers risk losing dollars to marketing initiatives that don't require their involvement, such as online contests, movies, and games. Publishers must find ways to diversify their offerings to become more appealing to advertisers and should explore types of integrated relationships that focus on product and consumer rewards."