Feature: Internet Set To Become Fastest Growing Media Ever In Terms Of Ad Revenue
If proof were needed that the internet will be the preferred business medium of the 21st century a recent report will confirm any doubts. Media agency Optimedia has published its research into the development of the internet and e-commerce in the UK and its estimates for growth in the sector go beyond all previous forecasts.
Its findings show that revenue for internet advertising will next year overtake that of cinema and begin to encroach upon both radio and outdoor. With the new market expanding at a much quicker rate than previously expected, the total amount spent on online advertising by 2003 is forecast to be £630 million as opposed to £500 million predicted only a few months ago.
This prediction, which will see a 4-year growth of a staggering 1,475%, would make the medium the fastest growing of all time. It is based on the estimation that almost 47% of the UK population will be online by the year 2003, a figure which equates to 27 million people. With the provision of free ISPs this year pushing initial penetration to over 50% of home computer users, the medium has been pushed into the mainstream. This penetration rate will be further driven over the next few years by two factors: digital television, and free, or very cheap, PCs.
Digital television companies are already starting to offer email through TV in a move which will eventually lead to full internet access through television sets. In the last few months the PC market has also been pushed by Tiny and Time which are leading the way with free PCs available for customers who subscribe to their telephony and internet services. Convergence of media and increased availability of cheaper hardware will push more and more consumers online.
As usage grows, then, the Net will increasingly become a place to spend money. At present the burgeoning sectors of e-commerce include books and travel with an average £816 spent by those who booked their holidays online last year. Optimedia research found that once consumers have made an initial online purchase they continued to use it for shopping, although barriers remain preventing widespread usage.
The major block seems to be fear of credit card fraud, something which should be diminished with increased security techniques. Another potential stumbling block is the price of phone calls required to make online purchases. At a recent Microsoft WebTV trial, participants said they would spend more online if the cost of phone calls was refunded; this is an idea which is more likely to be taken up by the retailer than the telephone companies.
Despite these barriers e-commerce has taken off with £1.2 billion predicted to be spent online this year and the market is forecast to be worth £7.2 billion by the year 2003.
The scene is set then for a massive increase in the advertising effectiveness of the internet. With the market expected to be worth around £40 million by the end of this year it will begin to take its place among the above-the-line advertising staples.
Ben Christie, head of new media at advertising agency New PHD, has seen a surge of interest in the internet as an advertising medium. “There are two main areas of growth. The first is the number of people incorporating the internet into their general communications strategy and the second is the growth in companies setting up their own advertising website.”
While the strategies for measurement of ad success on the Net are still in their infancy, the latest US research by internetTrak predicts that the Net will draw more revenue away from television than other media. Optimedia’s research predicts that by 2000 internet advertising will have overtaken cinema, which had a 0.5% share of advertising expenditure in the latest Advertising Association survey, and in the following years will encroach on radio and outdoor.
Charlie Dobres, of online media planning and buying specialists i-level, believes that Net advertising is already a major player. He describes the shift to net ads as “massive” with companies who previously spent £10,000-£20,000 on their online ad campaign now planning budgets in millions. Rather than squeezing another ad source he sees the extra money coming from marketing budgets that can use the Net’s unique banner strategy as a means of distribution as well as advertising.
This year has seen the emergence of large companies buying time on the net with major groups like British Airways and Ford incorporating the internet in their communications strategies. In the near future the question will not be whether a company can afford to display itself online but whether it can afford not to.