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Nearly half of marketers already doing online advertising
will decrease spending in traditional advertising channels to pay for
an increase in their online ad spending this year, according to a survey
released yesterday by Forrester Research Inc., Cambridge, MA. Search
engine marketing is expected to fuel much of that growth.
Forrester said total U.S. online advertising and marketing spending
will reach $14.7 billion for the year, up 23 percent from 2004. It also
expects the category to hit $26 billion by 2010, which would represent
8 percent of total ad spending and rival spending on cable/satellite
television and radio.
To contrast, a joint study by the Interactive Advertising Bureau and
PricewaterhouseCoopers last month said interactive ad revenue grew 33
percent last year to $9.6 billion. The report found that search, classifieds,
display and rich media ads were the most popular online tactics.
Still, those figures are quite small compared with overall ad spending,
which reached $155 billion in 2003, according to the Direct Marketing
Association's 2004 Statistical Fact Book.
"We are seeing the budget shift away from the direct mail, magazines
and newspapers. But a lot of increase in spending is coming from new
budgets altogether," said Shar VanBoskirk, consulting analyst at
Forrester and co-author of the report.
VanBoskirk also said the surveyed firms were not online-specific companies
but already were advertising online. Forrester surveyed 99 leading marketers
and included data from four forecasts.
"The addressability of the online medium lets you accomplish the
same thing that you would do with those channels but in a more immediate
way and in a way that's easier to track. And also because television
is such a dominant force that people aren't as able or as willing to
take money away from that at this point," she said. "Still,
the various media have a different and appropriate role. Online ad spending
is not going to replace these other forms of advertising."
Though marketers were optimistic about the role of online advertising,
Forrester said changes in consumer behavior will be the main driver
of online ad growth. The researchers cited four consumer trends to support
this: time spent online, online buying, online product research and
consumer advertising backlash across many channels.
Forrester also found that marketers rely on third-party e-mail lists
to compensate for list attrition but will gradually wean themselves
from this. Forrester predicts that e-mail list rental will peak in 2007
at $761 million before tapering off in 2008 to $665 million.
List rental budgets will be redirected into channels such as co-registration,
search marketing and display ads, the study said. In turn, list brokers
will focus on business-to-business lists, where sizes are high enough
to make the CPM price worth it. Meanwhile, Forrester said, marketers
will begin integrating e-mail better into their database marketing.
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