Feature: Dotcom Boom Drives Up Media Inflation

The huge influx of dotcom advertising to both on- and offline media over that last couple of years has been well documented. The necessity for these new internet companies to build up their brands quickly and effectively from scratch, has seen huge marketing budgets set aside for campaigns covering the full range of media. Television particularly has benefited from the increased demand for airspace. Even the much-publicised failure of boo.com has done little to stop the dotcom boom so far.

One downside of all of this extra revenue is that it is largely responsible for driving up media inflation. According to the latest forecasts produced by CIA MediaLab and Admap, display advertising is set to grow by 9.8% between 2000 and 2001, from £8.7 billion to £9.6 billion. At the same time though, costs per thousand (CPT) are set to rise by 4.9%.

Source: CIA/MediaLab

Whilst revenues are increasing across all media, audiences are not necessarily growing at the same rate – for national and regional newspapers audiences are predicted to decrease between 2000 and 2001 by 2.0% and 1.0% respectively. In all other media inflation of CPT is expected; total audiences size is forecast to grow by 1.5% against a display and classified combined revenue growth of 8.2%, giving an overall media cost inflation of around 4.5%.

Television display advertising is currently aided by ads from finance companies, including online banking and branding campaigns resulting from mergers and acquisitions. CIA expects this to slow in the coming year, but it still makes up for a reduction in fmcg advertising. For fmcg brands the problem is that media inflation is currently outstripping RPI and in the fmcg sector actual sales are more in line with RPI. As a result many fmcg advertisers have yielded to the dotcoms.

Radio may benefit from television’s inflation as brands turn to other, cheaper media as alternatives to TV. Radio, the fastest growing medium bar online in 1999, is expected to see revenues grow by 11% to £578 million. Just behind radio next year will be online advertising, with CIA’s forecasts showing a 150% rise to £500 million.

All sectors have benefited from online companies’ heavy marketing and finance, computing and retail brands have also been strong. However, CIA predicts that a lot of dotcom companies may fail to secure a second round of marketing money, which could result in a slight deflation of the dotcom boom effect.