US interactive advertising revenues will reach $8.6 billion by 2005, up slightly from this year’s anticipated $8.4 billion, according to new forecasts from GartnerG2.
The group says that whilst agencies have so far been hesitant to embrace interactive formats, they are set to increase their spending over the next couple of years, almost doubling the propoption of their budgets allocated to this area.
“As a percent of their clients’ total budget, media buyers will increase their spending on interactive from 5.5% of budget to 9.14%,” said Denise Garcia principal analyst for media and advertising at GartnerG2.
A survey conducted by GartnerG2 and the Interactive Advertising Bureau (IAB) found that whilst chief media buyers are now using interactive ads more frequently, 60% still feel that they are not as effective as traditional media.
Interactive advertising comprises all forms of online, wireless and interactive television advertising, including banners, sponsorships, email, keyword searches, referrals, slotting fees, classified ads and interactive television commercials.
According to the survey, media buyers perceive the primary strength of this type of activity to be in driving sales and traffic, whilst traditional media is seen primarily as a way to increase brand awareness and position products.
“A fundamental shift in these perceptions needs to occur for interactive advertising to substantially grow its share of the overall ad budget,” says Garcia. “Until interactive advertising can demonstrate an ability to deliver on brand awareness and product positioning campaigns, dollars will not begin to shift from traditional to interactive, and growth will be incremental.”
However, Gartner believes agencies will gain experience as they gradually increase the amount spent on interactive formats.
According to the survey, large agencies ($500 million or more in gross billings) are more likely to recommend interactive advertising than small agencies (less than $50 million). Among large agencies, 67% recommend interactive media.
