Online ad spending slated to grow by 30 percent in 2005

January 13, 2005

According to a study of media planners and buyers conducted recently by Deutsche Bank, Online marketers and Internet advertisers are expected to boost their overall Internet advertising spending by as much as 30 percent this year.

For the study released today, Deutsche Bank, in conjunction with MediaPost, questioned 100 media executives in December about their clients' experiences with Internet advertising in 2004 and their plans for this year.

This survey, which was conducted online by InsightExpress using members of the MediaPost advisory panel, is the first of an ongoing series of quarterly studies of media professionals by MediaPost and Deutsche Bank.

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The results pointed to a continued strength in online marketing, with media executives saying not only that their clients upped their online spending during the end-of-year holiday season, but also that they expected to increase it even more in the first quarter of this year.

"There's good momentum coming in to Q1," said Deutsche Bank Senior Analyst Jeetil Patel. "Marketers are actually budgeting interactive into their media mix." Eight percent of respondents forecast that their clients would spend more in the first three months of 2005 than in the last three months of last year.

Nearly one out of three respondents--27 percent--expected their clients would spend between 11 percent and 30 percent more in the first quarter of this year than the last quarter of 2004.

An additional 12 percent of respondents expected their clients' first-quarter online budgets to spike by 30 percent or more, while 41 percent expected their clients to up spending by 10 percent more in the first quarter of 2005 than the last three months of last year.

Based on the responses showing an increased ad spend in the first quarter--a traditionally slow advertising season--Deutsche Bank predicted a year-over-year leap in Internet advertising by up to 30 percent, said Patel. That's about the same as the increase from 2003 to last year, according to eMarketer estimates.

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Media execs surveyed also reported a rise in the cost of inventory for the fourth quarter. Ten percent of respondents thought cost-per-thousand impressions rose by at least 11 percent, while 62 percent said it increased by 10 percent or less. An additional 28 percent reported a decrease in cost-per-thousand impressions.

When it came to premium inventory, the price increase was steeper. Thirty-two percent of respondents said the cost-per-thousand impressions premium spots--streaming video, top-layer rich media, full-page arrivals, and the like--jumped by between 11 percent and 30 percent; an additional 5 percent of respondents said the price hike was at least 30 percent.

Slightly more than half of respondents--51 percent--reported a price hike of up to 10 percent for premium inventory, while only 3 percent of respondents said premium costs dropped.

Respondents allocated more ad dollars to branding campaigns than other types of advertising. They said they allocated 41.8 percent of their clients' online dollars to branded ads, 24.1 percent to direct response, 15.3 percent to paid search, 10.3 percent to e-mail, 4.9 percent to affiliate marketing, and 3.6 percent to other Internet advertising.

Where did they spend their online branding dollars? The largest proportion of media buys--34 percent--went to targeted content sites such as iVillage, MarketWatch, and CNET. A quarter of the budget--25 percent--went to the three largest portals, Yahoo!, MSN, and AOL.

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Respondents also disclosed that 14 percent of online ad dollars were allocated to Web sites of local TV, newspaper, and media, and 12 percent went to ad networks such as ValueClick, Advertising.com, and Burst.

When it comes to the future, half of all respondents said they expected behavioral targeting to be the single largest area of focus for themselves and their clients in the next six to 12 months.

An additional 21 percent said online video ads would be the primary focal point, while 16 percent expect to focus on local search or pay-per-call.

Source: Mediapost

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