WEB ADVERTISING TO GROW AT SLOWER PACE

By: Paul Bond PricewaterhouseCoopers Revises Forecast


(The Hollywood Reporter) Internet advertising will grow at a far slower
pace than expected a year ago, according to the comprehensive
second annual "PricewaterhouseCoopers Global Entertainment and
Media Outlook."

In the Internet chapter of last year's 380-page report, Price-
waterhouseCoopers predicted that revenue from online advertising
will grow in the United States from $8.6 billion last year to
$20.3 billion in 2004.

But the latest version of the book, which forecasts through 2005,
pegs online advertising at $15 billion in 2004, more than 26%
less than originally forecast. The report puts 2005 online
advertising at $18.2 billion.

Growth in Internet advertising in 2001 and '02 will slow to low
double-digit rates, then accelerate in 2003-05, the report
predicts.

Driving that later growth will be "streaming media and other more
engaging technologies" and "improved customer management and
customer targeting."

What changed from last year to now that has prompted
PricewaterhouseCoopers to slash its forecast? "Financial problems
encountered by online retailers and growing concerns about the
effectiveness of banner ads," the report says.

Also negatively impacting online advertising are poor click-
through rates, which have dropped to 0.3%, about a third of what
they were in 1997.

The report also deconstructs the problems that plague Internet
retailers, claiming, "the dot-bomb phenomenon reflects a vast
underassessment of the costs of online retailing."

Among the unforeseen shortcomings within the sector was lack of a
physical presence, which at one time was seen as a huge advantage
for dot-com retailers because of the expense involved in a
bricks-and-mortar presence and of maintaining a large inventory
of goods.

But, having a physical presence has proven a crucial advantage
because the sign and store are powerful marketing vehicles in and
of themselves. Traditional retailers, therefore, have less need
to spend heavily on television and radio advertising than do
their cyber counterparts.

As for Internet access, consumers in the United States will spend
$9.83 billion on broadband Internet access in 2005, up from $2.29
billion last year, while spending on narrowband will rise only
slightly to $10.32 billion from $9.4 billion.

The outlook for advertising and access spending combined will
rise from $19.92 billion last year in the United States to $38.35
billion in 2005, a compound annual growth rate of 14%.

Worldwide, combined spending on access and advertising looks like
this:

o Latin America will grow 40.6% annually to $1.87 billion in
2005.

o Asia-Pacific will grow 26.3% annually to $18 billion in 2005.

o Europe, Middle East and Africa will grow 17.4% annually to
$30.46 billion in 2005.

o Canada will grow 14.5% annually to $1.4 billion.



Copyright 2001, Editor & Publisher.