INSIGHTanalysis: Media Healthcheck – May 2005
In May, media agencies and industry bodies used the performance of the advertising market from the first quarter of 2005 to predict advertising expenditure for the coming year. Online advertising was shown to perform in line with predictions, growing at a rapid rate.
Following these eMarketer predictions, Forrester Research estimated online advertising and marketing expenditure in the US to reach $14.7 billion in 2005, with online advertising channels such as search engine marketing, online display adverts and email marketing continuing to become more effective, relative to traditional channels (see Online Adspend To Hit $13 Billion In 2005).
The Advertising Association (AA) and World Advertising Research Centre (WARC) forecast adspend in the UK to rise by almost 5% this year and by nearly 4% in 2006, revising their previous estimates downwards from 4.3% (see UK Adspend Forecast To Rise 5% In 2005).
Media agency network, Carat, also put its estimates into the pot, predicting global advertising expenditure growth to be 4.9%, just a slight revision from its previous forecast of 5.0% (see Popularity Of E-Shopping Continues To Grow).
Carat attributes this slight revision to the price of oil, weakness of the dollar and the US current account deficit, but remains positive about the overall outlook for this year.
Commenting on the predictions, Doug Flynn of Aegis Group, Carat’s parent company said: “The one-off impact of the quadrennial effect and additional spend generated by major sports and political events, provided a fillip to global adspend in 2004. We see 2005 growth settling at 4.9% with advertisers’ confidence stable and the market looking firm.”
Carat confirmed eMarketer’s and Forrester Research’s predictions for the internet’s dominance, predicting online advertising to perform strongly in 2005, with growth forecast reach around 20% in 2004 and 2005.
These views concerning online’s supremacy were reinforced by forecasts from financial services company, Goldman Sachs, predicting 2005 to be a bullish year for online advertising, with the market estimated to increase by 28% year on year, to reach $12.3 billion (see Popularity Of E-Shopping Continues To Grow).
The internet’s continuing strength was also reflected in strong predictions for the online retail sector, with sales in the US forecast to rise by almost 25% this year. A new study released by Shop.org and conducted by Forrester Research Revenues, forecast online retail revenues to increase to $109.6 billion, up from $89 billion in 2004 (see US Online Retail To Rise By 25% In 2005).
These projections are in line with analyst eMarketer’s latest online retail estimates, predicting US online retail sales to reach $84.5 billion this year, a 22.1% increase from last year (see US Online Shopping To Reach $84.5 Billion In 2005).