About Bulls and Booms

Internet ad-spending is up again in Q4 of 2004, rising to a record $2.43 bn, says Puneet Mehrotra.

Three columns and millions of bytes later, the Internet economy is still on a bull run. For almost over eight months now, the boom is just getting better and everybody, well almost everybody, seems to be happy. I, like an ardent follower and believer of the Web Economy have been reporting to you about the booming times. It’s just getting better and bigger.

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The Fundamentals

No, not the hype. No maverick CEO shifts. No mega mergers. No front page mega font headlines. And above all, no obscene display like the last 90’s.

The boom this time is distinctly different from the late 90’s. The bells and whistles are missing. The fundamentals are extremely strong and there absolutely exists no bubble to burst.

Soaring ad-spending

Internet ad-spending is up again in the last quarter of 2004, rising to a record $2.43 billion. This is the eighth-consecutive quarterly increase in Internet advertising and the fourth-straight to set a spending record, according to a report by PricewaterhouseCoopers (PwC) and the Internet Advertising Bureau (IAB).

Consider what BrandSuicide.com said in a recent issue.

“Figures released from the IAB, the UK's online advertising trade body, have shown that internet ad spend in the UK weighed in at £267m for the first six months of 2004, an year-on-year increase of 76%, largely due to the increasingly competitive paid-search market. This haul compares with the £298m in ad revenues generated by radio stations in the same period.”

You can view it here

Increase in Local Online Ad spending

What is interesting is that Internet is being used to target ‘local’ customers. According to Borrel Associates, there is a strong uptick in local online ad spending that began towards the end of 2004. It is continuing into 2005.

“We're projecting that local ad spending will increase a 46% over last year, more than twice the growth rate for all Internet advertising.”

Borrel has released a report with a list of spending data for 210 U.S. markets. The report also has estimates for locally-placed paid search advertising in those markets.

‘This follows the early pattern of other media (i.e., broadcast TV in the 1960s, cable in the 1990s) that saw a surge in spending by local advertisers when household penetration hit critical mass. For the Internet, we believe that point came at the end of 2003. More than 75% of US households currently have Internet access. (Source: Nielson//NetRatings).”

Key Report Facts & Stats according to Borrel Associates
· Total local online ad spending will hit $3.9 billion in 2005. This is a 46% increase over 2004 and more than twice the growth rate of overall Internet advertising.
· Paid search averages 8.4% of all locally spent online advertising. The total we're projecting for 2005 is $329.5 million. Without paid search, local markets would see a 33.8% increase in 2005.
· There was no discernible pattern for which markets are seeing greater growth. Large markets like San Francisco and Miami had below-average growth estimates of 21% and 26%, respectively, while Washington, D.C., appeared at the top of the list with projected growth of 69.8%.
· Major spending categories are General Merchandise Stores, which account for 30.6% of all local online ad spending (though we've seen this reach as high at 70% in some markets), Credit & Mortgage Services and Health Care. We're seeing very strong growth in the Real Estate category as well, particularly in paid search.

The Final Word

The internet vis-à-vis marketing and reaching your market was never a question. The question “when”. The upswing shows the time has finally come. The online boom is fundamentally strong and is there to stay.

Puneet Mehrotra is a web strategist at www.Cyberzest.com and edits www.MidnightEdition.com You can email ebiz333@yahoo.com