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Advertising Spending:Online and Offline Spending Forecasts in the US and Globally,Along with the Latest Data on Cross-Media Integration

July 2003

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3

Advertising Spending

Table of Contents 3

Methodology 7

The eMarketer Difference 8

The Benefits of eMarketer’s Aggregation Approach 9

“Benchmarking” and Projections 9

I Measuring the Money: Last Year’s Perspective 11

II US Online Ad Spending 17

A. Comparing Online with Offline 18

B. Online Spending Yesterday & Today: 2000 to 2003 20

Quarterly Reports 25

Online Advertising: Industries & Companies 26

C. AOL: How It Skews Online Ad Spending Figures 37

D. Online Spending Trends: 2000 to 2006 44

E. Online Forecasts: Methodologies Analyzed 55

F. Online Ad Format Spending 58

Banner Ads 62

Online Sponsorship 63

Search Advertising 64

Online Classified Ads 66

Rich Media 67

Interstitials & Pop-Up Ads 68

E-Mail Advertising 69

G. Plans for Online Ad Spending 70

H. Pricing Models, Pricing Trends 78

Transaction Types 86


4


III US Offline Ad Spending 89

A. Spending Plans for Total Media 90

B. Total Media Spending 92

C. The Offline Ad Market 98

By Media 99

By Industry & Advertiser 104

Promotion Spending 109

Hispanic Market Spending 110

D. Broadcast Spending 112

E. Print Spending 116

F. Other Offline Spending 121

IV Cross-Media Trends 125

A. Attitudes Toward Cross-Media Advertising 126

B. Media Measurement: Apples to Apples? 133

Cross-Media Metric Tools 143

C. Cross-Media Optimization 147

D. Four More Cross-Media Scenarios 157

American Airlines 158

Subaru 160

Oscar Mayer 162

Planters Peanuts 164

E. Cross-Media: Driving Traffic Online 168

F. Consumer Media Consumption 172

V Global Advertising Spending 177


5


A. Internet Ad Spending: Worldwide & Regional 180

B. Total Ad Spending: Worldwide & Regional 186

Regional Marketing 189

C. Canada 192

Total Media Spending: Canada 194

D. Europe 198

Total Media Spending: Europe 202

United Kingdom 205

Germany 210

France 213

Italy 216

Spain 219

Russia 221

E. Asia-Pacific 224

Total Media Spending: Asia-Pacific 226

Japan 228

Australia 232

F. Latin America 234

Total Media Spending: Latin America 236

Index of Charts 237

Reuse of information in this document, without prior authorization,is prohibited. If you would like to license this report for yourorganization, please contact David Iankelevich [email protected], or 212.763.6037.

Written by David Hallerman

Also contributing to this report:Yael Marmon, director of researchTracy Tang, researcherDavid Berkowitz, senior editorAllison Smith, senior editorKwanza Osajyefo Johnson, data entry associateDana Hill, production artist


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July 2003

Welcome to eMarketer

Dear Reader:

The Advertising Spending report from eMarketer provides marketing, media, ad agency, and businessprofessionals with a wide-ranging analysis of possibly the most compelling topic for the advertisingindustry: money. Whether online or offline, there’s an ongoing fascination with advertising spendingpatterns and predictions. In fact, even though projecting these various numbers merely creates movingtargets, they all point upward in 2003 and the three years ahead.

With more than 40 of eMarketer’s unique, cross-researcher, comparative estimate charts forspending areas such as online, television, newspaper, and global advertising, the Advertising Spendingreport examines the causes behind spending downturns the past couple of years, and why increasedspending is not just on the horizon but already here.

In addition to an array of nearly 300 charts and accompanying analysis, Advertising Spending offersa full range of related topics, such as: scenarios for better budget allocation in cross-media campaigns,how traditional metrics make evaluating online advertising more effective, spending plans amongadvertising executives, pricing models for online ads, and an exclusive in-depth examination of whichad formats researchers include in their online spending projections and what are the varyingmethodologies behind those numbers.

Note that Advertising Spending is part three of three interrelated eMarketer reports focusing onadvertising and marketing. The other two reports are:

■ Online Advertising Essentials: What Marketers Need to Know About Online Audiences, Dayparts,Branding, Direct Response, Context, Advertisers and Publishers

■ Online Advertising Tactics: Trends, Stats and Best Practices for Using Banners, Rich Media, Search,Sponsorships, E-Mail, Classifieds and More

In the pages ahead, you’ll find statistics, lists, and detailed information that can help you developbusiness and marketing plans, create presentations, answer questions from clients or management andmake critical decisions about ventures that affect all aspects of your company’s marketing operations.

Like all eMarketer reports, Advertising Spending presents statistical information aggregated from a broadrange of authoritative research sources, totaling 50 in all in this report. The data and analysis provideanyone working in nearly any enterprise with the answers they need, in an easy-to-search format.

If you have any questions or comments concerning eMarketer or any of the material in this report,please call, fax or e-mail us.

David HallermanSenior Analyst

David HallermanSenior Analyst, [email protected]

eMarketer, inc.821 BroadwayNew York, NY 10003T: 212.677.6300F: 212.777.1172

Methodology 7

The eMarketer Difference 8








Index of Charts 237


7



8


Methodology

Measuring the Money:Last Year’s Perspective

US Online Ad Spending

US Offline Ad Spending

Cross-Media Trends

Global Advertising Spending

Index of Charts

eMarketer’s approach to market research is founded on a philosophy ofaggregating data from as many different sources as possible. Why? Becausethere is no such thing as a perfect research study and no single researchsource can have all the answers. Moreover, a careful evaluation andweighting of multiple sources will inevitably yield a more accurate picturethan any single source could possibly provide.

The eMarketer DifferenceeMarketer does not conduct primary research, it therefore has no testingtechnique to defend, no research bias and no client contracts to protect.

eMarketer prepares each market report using a four-step process ofaggregating, filtering, organizing and analyzing data from leading researchsources worldwide.

Using the Internet and accessing a library of electronically-filed researchreports and studies, the eMarketer research team first aggregates publiclyavailable e-business data from hundreds of global research and consultancyfirms. This comparative source information is then filtered and organizedinto tables, charts and graphs. Finally, eMarketer analysts provide conciseand insightful analysis of the facts and figures along with their ownestimates and projections. As a result, each set of findings reflects thecollected wisdom of numerous research firms and industry analysts.

“I think eMarketer reports are extremely useful andset the highest standards for high quality,objective compilation of often wildly disparatesources of data. I rely on eMarketer’s researchreports as a solid and trusted source.”— Professor Donna L. Hoffman, Co-Director, eLab, Vanderbilt University

www.eMarketer.com©2001 eMarketer, Inc.

Analyze

Aggregate

Filter

Organize


9


Methodology




Cross-Media Trends


Index of Charts

The Benefits of eMarketer’s AggregationApproachObjective: information is more objective than that provided by any singleresearch sourceComprehensive: gathered from the world’s leading research firms,consultancies and news organizationsAuthoritative: quoted in leading news publications, academic studies andgovernment reportsAll in one place: easy to locate, evaluate and compareReadily accessible: so you can make quick, better-informed businessdecisionsAbove the hype: accurate projections that business people can use withconfidenceTime saving: there’s no faster way to find Internet and e-business stats,online or offMoney saving: more information, for less, than any other source in theworld

“Benchmarking” and ProjectionsUntil recently, anyone trying to determine which researcher was mostaccurate in predicting the future of any particular aspect of the Internet didnot have a definitive source with which to do this. For instance, over 10firms predicted e-commerce revenues for the fourth quarter 1998 onlineholiday shopping season, and yet no single source could be identified afterthe fact as having the “correct” number. In the Spring of 1999, however, theUS Commerce Department finally began measuring e-commerce B2Cactivity so business people and others could have a benchmark with whichthey could compare and evaluate projections.

eMarketer has adapted its methodology to recognize that certaingovernment and other respected, impartial sources are beginning toprovide reliable numbers that can be consistently tracked over time. Mostof these established sources, however, only measure past results; typically,they do not make predictions.


10


Methodology




Cross-Media Trends


Index of Charts

Today, eMarketer formulates its essential e-business numbers by firstidentifying the most established, reputable source for a given sector beingmeasured and then adopting that organization’s figures as benchmarks forthe historical/current period. For instance, eMarketer’s US Internet userfigures will be based on a combination of the most recent data from the USCensus Bureau and the International Telecommunication Union. Using thisdata as the benchmark for 2000 and 2001, eMarketer will make projectionsfor subsequent years based on the following factors:

■ a comparative analysis of user growth rates compiled from otherresearch firms

■ additional benchmark data from Internet rating firms, e.g.,Nielsen//NetRatings, comScore Media Metrix, which use panels tomeasure Internet user activity on a weekly and monthly basis

■ an analysis of broader economic, cultural and technological trends inthe US

Similarly, US e-commerce revenues are being “benchmarked” usinghistorical data from the US Department of Commerce, and broadbandhousehold and penetration rate forecasts are being built off baseline datafrom the Organization for Economic Cooperation and Development (OECD).

Through this benchmarking process, eMarketer will be holding itself –and its projections – accountable.

“When I need the latest trends and stats on e-business, I turn to eMarketer. eMarketer cutsthrough the hype and turns an overabundance ofdata into concise information that is sound anddependable.”— Mark Selleck, Business Unit Executive, DISU e-business Solutions, IBM

IMethodology 7






Index of Charts 237


11



12


Methodology




Cross-Media Trends


Index of Charts

Like Cuba Gooding Jr.’s Oscar-winning character in the 1996 movie “JerryMaguire,” most people in the advertising business are now crying, “Showme the money!” In the case of advertising, the money shows itself in theindustry’s ongoing fascination with spending patterns and predictions. Butthose numbers are merely moving targets, and the various analysts who tryto hit those targets seldom land dead center.

Before examining the comparative estimates chart for US onlineadvertising from July 2002’s perspective, let’s briefly summarize thespending statistics as of July 2003. According to the latest research fromthe Interactive Advertising Bureau and PricewaterhouseCoopers—whicheMarketer uses as its benchmark—Internet ad revenues for 2002 hit $6.01billion, representing a 15.8% drop from 2001’s spending figures. (You’llfind a great deal more current and future Internet ad spending data in thenext chapter, “US Online Ad Spending.”)

Just one year ago, however, much of the perspective on Internet adspending saw 2001 as the aberration after the burst of the Internet bubble,with a bounce-back imminent. In last year’s estimates, of the 15 researcherswith spending projections for 2002, only four came close to the final figure of$6.01 billion (when close is defined as within a half-billion dollars): ForresterResearch, J.P. Morgan, Morgan Stanley, and Salomon Smith Barney.


13


Methodology




Cross-Media Trends


Index of Charts

Several other researchers, including eMarketer, felt that 2001’s spendingslump was only a temporary setback, reasoning that the ongoingproliferation of Internet users and increased usage among them would leadto a resurgence in advertising spending. While that logic did, and still does,hold, what wasn’t factored enough into the equation last year was illogic—the fears raised by the double whammy of the seemingly discreditedInternet (as an advertising vehicle) and by an economy whiplashed byterrorism, deficit spending, and a rapidly declining stock market.

Comparative Estimates from July 2002: US OnlineAdvertising Spending, 2000-2005 (in billions)

Adams Media Research, May 2001

CMR**, August 2002

eMarketer*, July 2002

Forrester Research, October 2001

GartnerG2, December 2001

Goldman Sachs, December 2001

J.P. Morgan, September 2002

Kagan World Media, December2001

Merrill Lynch, September 2001

Morgan Stanley, November 2001

Myers Group, July 2002

Salomon Smith Barney, September2001

Universal McCann, July 2002

Veronis Suhler, July 2002

Yankee Group, 2001

Zenith Media, December 2001

–

2000

$7.0

$2.8

$8.2

$7.4

$8.2

–

$8.5

$6.9

$7.4

$4.3

$6.3

$6.5

$8.2

$6.6

$6.0

2001

$7.6

$2.5

$7.2

$6.0

$7.9

$7.4

$7.2

$6.4

$6.5

$5.7

$4.3

$5.9

$5.8

$7.3

$8.6

$6.6

2002

$9.0

–

$7.9

$6.3

$11.4

$7.7

$6.4

$7.0

$7.3

$5.7

$4.5

$6.5

$5.5

$7.6

$8.9

$7.5

2003

$10.6

–

$8.8

–

$14.7

–

$6.9

$7.9

–

–

$5.1

–

–

$7.9

–

$8.6

2004

$12.4

–

$10.6

–

$17.2

–

$7.7

$8.9

–

–

$6.5

–

–

$8.4

–

–

2005

$14.1

–

$12.7

$30.7

$18.8

–

$8.3

$10.1

–

–

$7.5

–

–

$8.9

–

–

Note: *eMarketer benchmarks its online advertising spending figuresagainst the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers(PwC) data, for which the last full year measured was 2001; **notincluding sponsorships, e-mail, most classifieds and barterSource: eMarketer, July 2002; various, as noted, 2001 & 2002

043463 ©2002 eMarketer, Inc. www.eMarketer.com


14


Methodology




Cross-Media Trends


Index of Charts

“The mistake we always make is we assume thesuccess in the next 10 years will be the same as thesuccess in the last 10 years.”— Eric Schmidt, chairman and chief executive officer, Google; Internet

Advertising Report, 22 October 2002

Then, when you view those spending dollars as growth rates, of the 17researchers offering figures for 2002, not a single one came close to thefinal spending decrease of 15.8% (when close is defined as being within 2.5points). Lehman Brothers, however, was nearly on target with its projectionof a 13.0% fall.

In fact, only three of the 17 predicted any degree of spending decline for2002, while the 13 estimated increases ranged from the Yankee Group’s3.5% all the way up to GartnerG2’s 44.3% expected gain (Morgan Stanleycalled for a flat market).

Comparative Estimates from July 2002: US OnlineAdvertising Spending Growth, 2001-2005 (as %increase/decrease vs. prior year)

Adams Media Research, May 2001

CMR, August 2002

eMarketer*, July 2002

Forrester Research, October 2001

GartnerG2, December 2001

Goldman Sachs, December 2001

J.P. Morgan, September 2002

Kagan World Media, December 2001

Lehman Brothers, May 2002

Merrill Lynch, September 2001


Myers Group, July 2002

Salomon Smith Barney, September2001

Universal McCann, July 2002


Yankee Group, 2001

Zenith Media, December 2001

2001

8.0%

-14.7%

-12.3%

-18.9%

–

-9.8%

-12.2%

-24.9%

–

-5.8%

-23.0%

0.0%

-6.3%

-11.6%

-11.9

30.3%

10.0%

2002

18.4%

5.3%

9.6%

5.0%

44.3%

4.1%

-10.8%

9.0%

-13.0%

12.3%

0.0%

4.0%

10.2%

-5.0%

4.1%

3.5%

13.0%

2003

17.8%

–

11.4%

–

28.9%

–

7.2%

13.4%

–

–

–

15.0%

–

–

4.0%

–

15.3%

2004

17.0%

–

20.5%

–

17.0%

–

11.3%

12.1%

–

–

–

26.9%

–

–

6.9%

–

–

2005

13.7%

–

19.8%

–

9.3%

–

8.3%

14.6%

–

–

–

15.0%

–

–

5.6%

–

–

Note: *eMarketer benchmarks its online advertising spending figuresagainst the Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers(PwC) data, for which the last full year measured was 2001Source: eMarketer, July 2002; various, as noted, 2001 & 2002



15


Methodology




Cross-Media Trends


Index of Charts

The fact that predictions from one year ago failed to match up well with themost current research is no reason to ignore this year’s predictions. In fact,as you’ll see in the next chapter, the Internet is still very young as anadvertising medium. And that youth makes those of us involved in thisspace potentially more open to the lessons imparted by our mistakes, andmore aware than ever of the rich and complex range of factors that go intoad spending trends.

“It’s either a competitive advantage or a conspiracyafoot that online marketing is a raging success andno one [advertiser] wants the others to know.”— Scot McLernon, executive vice president for sales and marketing,

CBS.MarketWatch; Media, April 2003

That said, the positive spending developments projected for 2003 andbeyond are based in recent news such as this:

■ In early April, Zenith Optimedia predicted that US ad spending in 2003will grow by 2.2% compared to 2002. That new figure compares withZenith’s December 2002 forecast of a 1.9% increase, which it describedas “bearish.”

■ In mid May, Nielsen Media Research announced that total USadvertising spending for Q1 2003 rose by 1.5% over the same timeperiod last year.

■ In late May, the Online Publishers Association said that Q1 2003 adrevenues at 24 of its Internet member companies grew by an average of40.7% over Q1 2002.

■ Also in late May, Merrill Lynch analyst Lauren Rich Fine forecast totalUS ad expenditure growth of 3.3% for 2003 (or 3.1% including directmarketing).

■ In early June, PricewaterhouseCoopers and the Interactive AdvertisingBureau indicated that US online ad revenues in Q4 2002 increased by8.9% over the previous quarter.

■ In mid June, TNS Media Intelligence/CMR said not only that total USad spending climbed by 4.9% in Q1 2003, compared to the samequarter in 2002, but online ad spending soared by 12.2% in the sameperiod.

■ And later in June, Universal McCann forecaster Robert Coen revised hisestimate of US advertising spending in 2003 from a 5.0% gain to 4.6%.While that full-year revision appeared negative, Coen also said thatthis year’s second half would see a major boost in ad spending, leadingto a 6.5% jump in 2004.


16


Methodology




Cross-Media Trends


Index of Charts

“I think we’re at the moment in time wheretelevision was in the mid 1950s. What lies ahead isa generation of consumers that grew up with thisas part of their media landscape.”— Michael Zimbalist, executive director, Online Publishers Association;

MediaPost, 23 April 2003

Why the optimistic take overall? “The restraints that have held advertisingin check in previous recessions don’t apply in 2003. It’s all about fightingfor market share,” reported MediaPost in March. “Advertisers today want tokeep their messages in front of viewers, lest a competitor gets there soonerand more often.”

IIMethodology 7



A. Comparing Online with Offline 18

B. Online Spending Yesterday & Today: 2000 to 2003 20


D. Online Spending Trends: 2000 to 2006 44


F. Online Ad Format Spending 58

G. Plans for Online Ad Spending 70

H. Pricing Models, Pricing Trends 78




Index of Charts 237


17



18


Methodology




Cross-Media Trends


Index of Charts

Since the beginning of this century, the path of US online advertisingspending has been much like an extreme roller coaster—quickly up, thenjust as quickly down. But just as this century is still quite young, with itstrue defining trends yet to be determined, so is online advertising. Eventhough the Internet is still an emergent ad medium, much analysis ofonline ad spending is permeated by comparisons to older and far moretraditional media such as TV or newspapers.

A. Comparing Online with OfflineSuch comparisons are often unfair to an advertising medium as new anddifferent as the Internet, and a broader perspective may be required to see itbetter. In the long run, all media have slow growth years, which in the chartbelow are defined as years either when advertising spending actuallydeclined or when it grew by 1.0% or less. Looking back starting in 1940,total media spending in the US saw six slow growth years, or 9.5% of the63-year span measured using Universal McCann data.

“It does not help the industry to call it online andtraditional media.”— Mark N. Dorf, CEO, AMS Interactive Media; Media Magazine,

November 2002

Those media that outperformed the entire ad market—based on lowestpercentage of slow growth years—are TV, both broadcast and cable, anddirect mail. On the other side, from 1940 to 2002 radio, newspapers, andmagazines all had several more slow growth years than average.

Now on a percentage basis, Internet advertising has seen the greatestshare of hard times, at 33.3% of the years in which its ad spending has been tracked. But for the Internet, that’s a mere six years—not enough time to form a statistically valid sample. Contrast that brief span with 22years for cable TV, 53 years for broadcast TV, and 63 years for the othermedia shown.


19


Methodology




Cross-Media Trends


Index of Charts

The Internet made its commercial debut as an advertising medium only afew years prior to a sustained downturn in the economy. If nothing else,then, this data should begin to give a perspective on Internet advertisingthat too often seems lacking.

In fact, even with that broader point of view, determining both theupcoming trends of Internet advertising and its recent past is still coloredby varied interpretations of the same phenomena. When such subjectiveperspectives are applied to Internet ad spending’s roller coaster, you getdetails such as:

■ Revenue at WashingtonPost.com in Q4 2002 rising to $10.6 millionfrom $7.3 million in the prior year’s Q4 period, a 45% gain

■ The Interactive Advertising Bureau and PricewaterhouseCoopersreporting that online advertising revenues for 2002 fell by 15.8%compared to the previous year but rose by 8.9% in the same year’s final quarter

■ America Online losing more than 1 million dial-up customers since lastyear, further hurting the online service’s attraction to advertisers

■ Internet advertising growing by 12.2% in Q1 2003, according to TNSMedia Intelligence/CMR

Slow Growth Years for Various US Advertising Media,by Number of Years Spending Declined or Grew by1.0% or Less, 1940-2002

Number ofyears

advertisingdeclined

Number ofyears

advertisinggrew by

1.0% or less

Total Percent ofyears

measured

Broadcast TV (53)* 3 1 4 7.5%

Direct Mail (63) 3 2 5 7.9%

Cable TV (22) 0 2 2 9.1%

Total Media (63) 4 2 6 9.5%

Radio (63) 6 2 8 12.7%

Newspapers (63) 8 2 10 15.9%

Magazines (63) 10 2 12 19.0%

Internet (6) 2 0 2 33.3%

Note: *numbers in parentheses denote number of years measured foreach mediumSource: Universal McCann, December 2002; calculated by eMarketer, April2003



20


Methodology




Cross-Media Trends


Index of Charts

B. Online Spending Yesterday & Today:2000 to 2003After hitting a peak of $8.1 billion in 2000, spending on Internetadvertising has fallen in each measured year, down to $7.1 billion in 2001and down further to $6.0 billion in 2002, according to IAB/PwC.

But along with most other researchers, eMarketer sees a rebound thisyear, rising to $6.3 billion, or a 4.8% gain.

“Remember, ad numbers that are more than acouple of years old contain a lot of junk, includingthe tail-ends of some awful long-term deals andhundreds of millions of dollars in phonyadvertising that AOL has since written off.”— Barry Parr, Internet media and e-commerce consultant, and former vice

president of news, CNET; MediaSavvy blog, 10 April 2003

Comparative Estimates: US Online AdvertisingSpending, 2002 & 2003 (in billions)

2002 2003

CIBC World Markets, November 2002 $6.1 $6.1

CMR/TNS, March 2003 $5.7 –

Corzen, January 2003 $8.6 –

eMarketer*, June 2003 $6.0 $6.3

GartnerG2, October 2002 $8.7 $9.1

Goldman Sachs, June 2003 $6.0 $6.0

IAB/PwC, June 2003 $6.0 –

Initiative Media, March 2003 $2.8 $2.8

J.P. Morgan, August 2002 $6.4 $6.9

Jupiter Research, October 2002 $5.6 $6.2

Lehman Brothers, May 2002 $4.8 $7.6

Myers Report, May 2003 $4.0 $4.1

PricewaterhouseCoopers, May 2002 $7.6 $8.0

Salomon Smith Barney, October 2002 $7.0 $7.6

Universal McCann, June 2003 $4.9 $5.1

Veronis Suhler Stevenson, July 2002 $7.6 $7.9

Note: *eMarketer benchmarks its online ad spending projections againstthe Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC)data, for which the last period measured was Q4 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003



21


Methodology




Cross-Media Trends


Index of Charts

Companies expecting even higher gains in 2003 include Jupiter Research,at 10.7%, and J.P. Morgan, at 7.2%. Growth rates similar to eMarketer’s4.8% estimate are found from Universal McCann at 5.0%, GartnerG2 at4.7%, PwC (its research separate from the IAB) at 5.3%, and Veronis Suhlerat 4.0%.

Other research firms project smaller growth for online ad spending or flatrates, such as 0.7% from Goldman Sachs or no growth from CIBC.

Comparative Estimates: US Online AdvertisingSpending Growth, 2002 & 2003 (as a %increase/decrease vs. prior year)

Jupiter Research, October 2002

1.0%

10.7%

CMR/TNS, March 2003

-11.9%

7.4%

J.P. Morgan, August 2002

-10.8%

7.2%

PricewaterhouseCoopers (PwC), May 2002

0.9%

5.3%

Universal McCann, June 2003

-15.1%

5.0%

eMarketer*, June 2003

-15.8%

4.8%

GartnerG2, October 2002

4.9%

4.7%

Veronis Suhler Stevenson, July 2002

4.1%

4.0%

Myers Report, May 2003

-8.0%

2.6%

Goldman Sachs, June 2003

-17.5%

0.7%

continued on page 22


22


Methodology




Cross-Media Trends


Index of Charts

In an uneven market, some Web publishers are doing much better thanothers. Recent research from Goldman Sachs analyzed the onlineadvertising revenues from six major Web publishers, including AOL,Yahoo!, and MSN. These half-dozen large publishers make up more thanhalf of the entire online ad market.

CIBC World Markets, November 2002

-15.0%

0.0%

2002 2003

Note: *eMarketer benchmarks its online ad spending projections againstthe Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers (PwC)data, for which the last period measured was Q4 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003


US Online Advertising Revenues, by Web Publisher,2000-2003 (as a % of total revenues)

2000 2001 2002 2003

MSN 5.3% 7.2% 10.8% 14.9%

AOL 25.9% 30.5% 20.5% 13.3%

Yahoo! 9.9% 5.9% 7.5% 10.2%

Overture 1.2% 3.8% 6.5% 8.3%

Lycos 3.9% 4.5% 4.0% 2.8%

CNET 4.1% 2.7% 2.5% 2.5%

6 listed companies 50.3% 54.6% 51.9% 52.1%

Note: 2000 total=$8.24 billion; 2001 total=$7.21 billion; 2002 total=$5.95billion; 2003 total=$5.99 billionSource: Goldman Sachs, June 2003



23


Methodology




Cross-Media Trends


Index of Charts

The shift in the market shows up in several ways. Take 2002’s figures, forexample, where at $1.22 billion, AOL had nearly twice the ad revenue of itsleading competitor, MSN at $645 million. But Goldman Sachs’s projectionfor 2003 shows MSN as the leading Web publisher, with online ad revenuesof $894 million.

When viewing the revenue figures by growth rates, it appears that in both2002 and 2003, MSN, Yahoo!, and Overture surpassed the total spendingfigures of a 17.5% decrease and a 0.7% increase, respectively. In fact, thisyear Goldman Sachs sees those three companies increasing their online adrevenues by more than 30% each.

Meanwhile, for the same two years, the investment banking firm reportsdecreased or flat revenues for CNET, Lycos, and AOL.

US Online Advertising Revenues, by Web Publisher,2000-2003 (in millions)

2000 2001 2002 2003

MSN $437 $520 $645 $894

AOL $2,134 $2,198 $1,222 $800

Yahoo! $818 $428 $448 $613

Overture $99 $271 $384 $500

Lycos $322 $324 $239 $170

CNET $338 $198 $148 $148

Sub-total $4,148 $3,939 $3,086 $3,125



US Online Advertising Revenue Growth, by WebPublisher, 2000-2003 (as a % increase/decrease vs.prior year)

2000 2001 2002 2003

MSN 62.0% 19.0% 24.0% 38.6%

AOL 70.0% -47.7% 4.7% 36.8%

Yahoo! 268.0% 173.7% 41.7% 30.2%

Total 78.0% -12.5% -17.5% 0.7%

CNET 71.0% -41.4% -25.3% 0.0%

Lycos 55.0% 0.6% -26.2% -28.9%

AOL 99.0% 3.0% -44.4% -34.5%




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“If our industry was regulated like publiccompanies, the industry and its analysts wouldprobably be required to restate their numbers for1999 and 2000, and we would probably find that thereported online advertising numbers for 1999 and2000 were overstated by several billion dollarseach year.”— John Durham, COO of Interep Interactive; Media Life, 3 February 2003


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Quarterly ReportsWhen the measurement focus is narrowed from annual to quarterly, the upsand downs in the online ad spending market appear even morepronounced—reflecting in some ways the overall economic trends.

Take the last eight quarters measured by the IAB and PwC, the two fullyears of 2001 and 2002. Starting from a peak of $1.87 billion in Q1 2001,spending fell continually, quarter by quarter, to as low as $1.45 billion inQ3 2002, and then beginning a rise to $1.58 billion the next quarter.

In the three full years measured by the IAB/PwC researchers, the biggestspending fall came in Q1 2001, at 11.8%. And the greatest rise came mostrecently, in Q4 2002, at 8.9%, similar to figures in 2000’s Internet boom days.

“The glass is half full in that things have bottomed out.”— Peter Petrusky, director new media, PricewaterhouseCoopers;

Forbes.com, 23 May 2003

US Online Advertising Spending, Q1 2000-Q4 2002 (inbillions)

Q1 2000 $1.92

Q2 2000 $2.09

Q3 2000 $1.95

Q4 2000 $2.12

Q1 2001 $1.87

Q2 2001 $1.85

Q3 2001 $1.77

Q4 2001 $1.64

Q1 2002 $1.52

Q2 2002 $1.46

Q3 2002 $1.45

Q4 2002 $1.58

Note: 2000 and 2001 figures were adjusted to reflect revenuerestatements reported in public filings by several individual companiesSource: Interactive Advertising Bureau, PricewaterhouseCoopers, October2002



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Nevertheless, when you compare the quarterly spending figures to the samequarters in prior years, you won’t find a gain since Q4 2000’s 19.5% jump.

Online Advertising: Industries & CompaniesWhich types of companies are contributing most to the spendingbounceback? As companies look increasingly to the Internet, the averageshare of industry budgets going toward online advertising in the Q1 2001to Q1 2002 period was 7.7%, according to DoubleClick. But fields morehighly invested in Internet advertising include business property andemployment recruiting at 46.7%, computers and office equipment at15.6%, and publishing and media at 15.5%.

US Online Advertising Spending, Q1 2000-Q4 2002 (as a% increase/decrease vs. prior quarter and vs. samequarter of prior year)

% growth vs.prior quarter

% growth vs.same

quarter ofprior year

Q1 2000 8.2% 177.3%

Q2 2000 8.8% 123.9%

Q3 2000 -6.7% 60.3%

Q4 2000 8.8% 19.5%

Q1 2001 -11.8% -2.6%

Q2 2001 -1.3% -11.6%

Q3 2001 -4.1% -9.1%

Q4 2001 -7.4% -22.7%

Q1 2002 -7.4% -18.8%

Q2 2002 -4.1% -21.1%

Q3 2002 -0.5% -18.2%

Q4 2002 8.9% -3.7%

Note: 2000 and 2001 figures were adjusted to reflect revenuerestatements reported in public filings by several individual companiesSource: Interactive Advertising Bureau, PricewaterhouseCoopers, June2003



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Online's Share of Total US Advertising, by Category,Q1 2001-Q1 2002

Business prop. and employment recruiting

46.7%

Computers, office equipment and stationery

15.6%

Publishing and media

15.5%

Retail

14.7%

Business and consumer services

13.3%

Travel, hotels and resorts

12.0%

Electronic entertainment equipment and supplies

10.4%

AVERAGE

7.7%

Insurance and real estate

6.4%

Entertainment and amusements

5.6%

Apparel, footwear and accessories

4.5%

Drugs and remedies

3.2%

Freight, industrial and agricultural development

3.0%

Sporting goods, toys and games

3.0%

Household equipment and supplies

1.8%

Toiletries and cosmetics

1.4%

Foods and food products

1.1%

Automobiles, auto accessories and equipment

1.0%

Source: DoubleClick, December 2002



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And the consumer electronics companies increased their online budgetshare in Q1 2002 by 11.2%, far more than any other industry shown.

Online's Share of Total US Advertising, by Category,Q1 2001 vs. Q1 2002 (as a % increase/decrease)

Electronic entertainment equipmentand supplies

11.2%

Travel, hotels and resorts

3.6%

Insurance and real estate

0.6%

Drugs and remedies

0.4%

Foods and food products

0.3%

Apparel, footwear and accessories

0.2%


0.1%

Household equipment and supplies

-0.2%

Automobiles, auto accessories and equipment

-0.2%

Business and consumer services

-1.0%

Sporting goods, toys and games

-1.0%

Entertainment and amusements

-1.4%

Freight, industrial and agriculturaldevelopment

-2.4%

Computers, office equipment and stationery

-4.3%

Publishing and media

-4.4%

Retail

-7.8%

Business prop. and employmentrecruiting

-17.0%

Source: DoubleClick, December 2002



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Note that the auto industry spent only 1.0% of its ad dollars online in thatperiod (mainly in 2001). And yet, since auto manufacturers spend suchlarge sums on advertising in general, even that small percentage translatedto $387.6 million in 2001, according to estimates from Jupiter Research, orfourth among the eight industries listed in the chart below.

And the past is not perfectly prologue, either, since as the auto industryincreasingly discovered online advertising’s effectiveness for reaching itstarget audience, it turned into the top spender in 2002, with a 116%increase to $839.3 million.

US Online Ad Spending, by Industry, 2001 & 2002 (inmillions and as a % increase/decrease vs. prior year)

2001 2002 Growth rate

Automotive $387.6 $839.3 116.5%

Financial services $941.3 $671.4 -28.7%

Media $1,107.4 $615.5 -44.4%

Health $276.9 $503.6 81.9%

Computer hardware $664.4 $391.7 -41.0%

Travel $276.9 $391.7 41.5%

Consumer goods $276.9 $391.7 41.5%

Telecommunications $166.1 $279.8 68.5%

Total (for 8 industries) $4,097.4 $4,084.4 -0.3%

Note: based on Jupiter's US online ad spending figures of $5,537 million(2001) and $5,595 million (2002)Source: Jupiter Research, October 2002; calculated by eMarketer, May2003



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The IAB/PwC study categorizes online ad spending in broader industrygroupings than the granular DoubleClick data above. The general consumercategory contributes more to online ad spending revenues than the otherindustries shown below, staying in the 30% range from 2000 through 2002.

Looking at the same industry spending-share figures as absolute dollars,and it appears that the IAB/PwC figures sharply disagree with Jupiter’sestimates above—at least in some categories, and as far as those categoriesare comparable. Take consumer goods, which Jupiter says spent $391.7million for online advertising in 2002; the figure for the consumer industryfrom the IAB/PwC study is far higher at $1.92 billion.

US Online Advertising Spending, by IndustryCategory, 2000-2002 (as a % of total spending)

Consumer

31%

30%

32%

Computing

18%

18%

18%

Financial services

14%

12%

13%

Media

8%

12%

12%

Business services

9%

9%

7%

Other

20%

19%

18%

2000 2001 2002

Note: 2000 total=$8.09 billion; 2001 total=$7.13 billion; 2002 total=$6.01billionSource: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers(PwC), June 2003



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But when the industry category is simply media, more convergence isfound. Jupiter’s figure for 2002 above is $615.5 million, while theIAB/PwC’s below is $720 million.

US Online Advertising Spending, by IndustryCategory, 2000-2002 (in billions)

Consumer

$2.51

$2.14

$1.92

Computing

$1.46

$1.28

$1.08

Financial services

$1.13

$0.86

$0.72

Media

$0.65

$0.86

$0.72

Business services

$0.73

$0.64

$0.42

Other

$1.62

$1.36

$1.08

2000 2001 2002




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With the 15.8% decrease for total online ad spending in 2002, none of themajor industry categories listed by the IAB/PwC showed any growth. Andboth the computing and media industries followed the total online trend,matching that 15.8% downturn.

When the IAB/PwC’s perspective changes from categorizing by industry tothe focus on consumers, sellers of retail goods had the highest share of USonline ad spending in 2002, at 42%. The auto industry, at 19%, increasedits share of spending by eight points from 2001’s figures.

US Online Advertising Spending Growth, by Product/Service Category, 2001 & 2002 (as a % increase/decrease vs. prior year)

Consumer-related

-14.6%

-10.1%

Computing products

-11.8%

-15.8%

Media

32.3%

-15.8%

Financial services

-24.4%

-8.7%

Business services

-11.8%

-34.5%

Other

-16.2%

-20.2%

2001 2002




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Note that the IAB/PwC industry category (the three charts above) and theconsumer category (the three charts below) overlap partially. The formerdefinitions look at what industry the advertiser is in; the latter definitionslook at the ways consumers are targeted.

US Online Advertising Spending, by ConsumerCategory, 2000-2002 (as a % of total spending)

Retail

42%

50%

42%

Auto

19%

11%

19%

Music

7%

12%

15%

Travel/hotels

9%

10%

14%

Amusement

4%

5%

4%

Other

19%

12%

6%

2000 2002 2002




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Retailers spent over $2.5 billion for online advertising last year, followedby the auto industry at more than $1.1 billion.

US Online Advertising Spending, by ConsumerCategory, 2000-2002 (in billions)

Retail

$3.40

$3.57

$2.52

Auto

$1.54

$0.78

$1.14

Music

$0.57

$0.86

$0.90

Travel/hotels

$0.73

$0.71

$0.84

Amusement

$0.32

$0.36

$0.24

Other

$1.54

$0.86

$0.36

2000 2002 2002




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Even though retail advertisers spent the most last year for interactiveadvertising, that was still a 29.2% fall from the industry’s 2001 spendingfigures. Meanwhile, as also indicated in the Jupiter data above, the autoindustry increased its online spend in 2002, rising by 45.5% by theIAB/PwC estimates.

US Online Advertising Spending Growth, by ConsumerCategory, 2001 & 2002 (as a % increase/decrease vs.prior year)

Auto

-48.9%

45.5%

Travel/hotels

-2.0%

17.9%

Music

51.2%

5.3%

Retail

5.0%

29.2%

Amusement

10.3%

-32.6%

Other

-44.3%

-57.9%

2001 2002




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No matter how the industry is defined, consolidation remains one name of the game. The top 10 Web publishers raked in 72% of the revenues in Q4 2002, according to the IAB/PwC, while the top 25 had 89% of thatquarter’s revenues.

Share of US Internet Advertising Revenues among Top10, 25, and 50 Ad-Selling Web Sites, Q4 2002

Top 10 72%

Top 25 89%

Top 50 97%

Source: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers(PwC), June 2003



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C.AOL: How It Skews Online Ad Spending FiguresTrying to describe the state of Internet advertising and not factoring inAmerica Online’s impact on online ad revenues is a lot like the joke makingthe rounds recently: A factory worker is sitting alone in a bar drinking,telling the bartender about how hard it is to make ends meet, when BillGates enters the bar. The bartender tells the worker, “Cheer up! Now onaverage everyone in this bar is a billionaire.”

In much the same way, but in reverse, the red ink spurting from AOL’sflagging online advertising revenue stream continues to drag down theaverage online revenue figures—which would be substantially moreoptimistic and positive if you factored AOL out of the equation.

As the largest online service, AOL’s ad sales disproportionately color anyanalysis of the industry as a whole. For example, in early December 2002,AOL Time Warner—the service’s parent company—announced expectationsthat its online division’s advertising and e-commerce revenue in 2003,which consists mostly of ad sales, would slump 40% to 50%, followingequally steep declines posted in 2002.

“I can’t speak for AOL, but throughout the industry,we’re seeing a turnaround in online advertising.We’ve seen significant increases in spending bymany of our major clients.”— Jim Warner, president, Avenue A/New York; BusinessWeek Online, 3

December 2002

Even when AOL Time Warner reported in late April 2003 that it earned$396 million in the first quarter of 2003, and said that the turnaround washelped by a 6.3% jump in revenues, the company also said revenues at thecompany’s online division slipped by 4% to $2.20 billion, pulled down bydeclines in advertising. The company also claimed that its ban on pop-upads contributed to the loss.

Looked at over a nearly four-year span, and the roller coaster nature ofAOL’s advertising revenues comes clear—going from a low of $205 millionin Q1 1999 up to a high of $598 million in Q1 2001 and back down to $266million in Q3 2002. These Morgan Stanley estimates are based on theassumption that 83% of AOL’s reported US advertising and commercerevenue has been advertising, per company disclosures in Q2 and Q3 2002.


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In contrast, note how total US online ad revenues without AOL’s figures hasremained relatively steady in the $1.1 billion to $1.3 range since Q1 2001.

Viewed on an annual basis, and you can see how AOL’s Internet advertisingrevenue peaked in 2001 and has fallen rapidly since.

Comparison of US Internet Advertising with andwithout AOL's Contribution, Q2 1999-Q3 2002 (inmillions)

US total AOL's US total Total withoutAOL

Q1 1999 $693 $205 $488

Q2 1999 $934 $225 $709

Q3 1999 $1,217 $266 $951

Q4 1999 $1,777 $334 $1,443

Q1 2000 $1,953 $438 $1,515

Q2 2000 $2,124 $466 $1,658

Q3 2000 $1,986 $493 $1,493

Q4 2000 $2,162 $569 $1,593

Q1 2001 $1,893 $598 $1,295

Q2 2001 $1,868 $586 $1,282

Q3 2001 $1,792 $518 $1,274

Q4 2001 $1,658 $529 $1,129

Q1 2002 $1,520 $409 $1,111

Q2 2002 $1,458 $334 $1,124

Q3 2002 $1,470 $266 $1,204

Note: US total from IAB/PwC; assumed that historically 83% of AOL'sreported US advertising and commerce revenue has been advertising, percompany disclosures Q2 2002 & Q3 2002Source: Morgan Stanley Equity Research, Interactive AdvertisingBureau/PricewaterhouseCoopers, AOL Time Warner reports, April 2003


Comparison of US Internet Advertising Spending withand without AOL's Contribution, 1999-2002 (in billions)

US total AOL's UStotal

Total withoutAOL

1999 $4.62 $1.03 $3.59

2000 $8.23 $1.97 $6.26

2001 $7.21 $2.23 $4.98

2002* $5.56 $1.26 $4.30

Note: US total from IAB/PwC; assumed that historically 83% of AOL'sreported US advertising and commerce revenue has been advertising, percompany disclosures Q2 2002 & Q3 2002; *supplied figures from Q1-Q32002 multiplied by 125% to get full year's estimateSource: Morgan Stanley Equity Research, Interactive AdvertisingBureau/PricewaterhouseCoopers, AOL Time Warner reports, April 2003



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A similar analysis from Goldman Sachs, but just by year rather than byquarter, paints a similar picture. Estimates for AOL’s online ad revenue inthe US are about the same as from Morgan Stanley, and projections for2003 show an even more severe drop-off to substantially under $1 billion.

US Online Advertising Revenues with and withoutAOL's Contribution, 2000-2003 (in billions)

US total AOL's UStotal

Total withoutAOL

2000 $8.24 $2.13 $6.11

2001 $7.21 $2.20 $5.01

2002 $5.95 $1.22 $4.73

2003 $5.99 $0.80 $5.19

Source: Goldman Sachs, June 2003



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If you had any doubt that AOL is the proverbial 800-pound gorilla in theonline ad world, the Morgan Stanley research shows that even as AOL’stotal ad revenue figures have tumbled, its weight continues to dictate theonline ad market’s overall health. While AOL’s share of total US Internetadvertising fell from its plus-30% high in 2001 to 18% in Q3 2002, itremains the largest single player in the industry.

AOL's Share of Total US Internet Advertising, Q11999-Q3 2002

Q1 1999 29.6%

Q2 1999 24.1%

Q3 1999 21.9%

Q4 1999 18.8%

Q1 2000 22.4%

Q2 2000 21.9%

Q3 2000 24.8%

Q4 2000 26.3%

Q1 2001 31.6%

Q2 2001 31.4%

Q3 2001 28.9%

Q4 2001 31.9%

Q1 2002 26.9%

Q2 2002 22.9%

Q3 2002 18.1%

Note: US total from IAB/PwC; assumed that historically 83% of AOL'sreported US advertising and commerce revenue has been advertising, percompany disclosures Q2 2002 & Q3 2002Source: Morgan Stanley Equity Research, Interactive AdvertisingBureau/PricewaterhouseCoopers, AOL Time Warner reports; November2002; eMarketer calculations, April 2003



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Again, the research from Goldman Sachs backs up the Morgan Stanleycalculations when it comes to AOL’s advertising share. With projections forthis year at a 13.3% share, however, less than half of only two years ago,AOL’s influence on US online ad spending figures is more like a gorilla on astarvation diet.

The distorted views produced by AOL’s woes skew the traditional adindustry’s perceptions of the value of online advertising. The chief cause ofthe online giant’s ad revenue declines dates back to dot-com days, when itsigned long-term sponsorship deals and a backlog of other contracts, someof which won’t expire until the end of 2003. What created profits then are adrag on the bottom line now.

“Barter deals were apparently made to look like ad deals,” reportedMediaPost in January 2003. “Long-term ad deals are alleged to have beenbooked as revenue earlier than appropriate. AOL [is] in hot water for justsuch alleged deception.… In fact, much of the ad ‘decline’ in the past yearhas been not so much a real reduction of advertiser spending, but areflection of new accounting methods used.”

“At the time of the deal, January 2000, AOL hadrevenues of $4 billion a year, and Time Warner hadrevenues of $26 billion. Yet AOL got 55% of thecombined company.”— Michael Kinsley, former editor-in-chief, Slate.com; 6 February 2003

And while not barter deals, per se, AOL books in-house ads—such as onesfor Warner Brothers movies or Time Inc. magazines—as revenue, reportsCNET News. This is unlike a site such as MSN, which does not count adsfrom other Microsoft divisions in its revenue stream.

AOL's Share of Total US Internet AdvertisingSpending, 2000-2003

2000 25.9%

2001 30.5%

2002 20.5%

2003 13.3%




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By relegating AOL’s contribution to the sidelines, a more accurate accountingof online advertising’s growth emerges. When you compare AOL’s growthrates quarter-by-quarter with the total US numbers from the InteractiveAdvertising Bureau and PricewaterhouseCoopers, the contrast is striking. TakeQ3 2002 alone. Because AOL’s ad revenues declined by more than 20%, thetotal growth figure from IAB/PwC appeared flat at less than 1%. And yet, theonline ad industry sans AOL showed a healthy 7% growth rate.

Viewed annually through the Goldman Sachs research, it’s easy to see howin 2001, AOL’s positive ad sales growth of 3.0% supported a weakeningmarket. But last year’s more severe total downturn of 17.5% turns into a farless dramatic 5.7% decrease when AOL’s 44.4% fall is not counted. Notehow that total 17.5% drop from Goldman Sachs is about the same as theIAB/PwC 15.8% decrease for 2002.

Perhaps more important is how Goldman Sachs predicts that while totalInternet advertising growth will be a mild 0.7% in 2003, it will be a healthy9.8% gain without AOL’s figures.

Comparison of US Internet Advertising with andwithout AOL's Contribution, Q2 1999-Q3 2002 (as a %increase/decrease vs. prior quarter)

Total growth AOL growth Growthwithout AOL

Q2 1999 34.8% 9.8% 45.3%

Q3 1999 30.3% 18.2% 34.1%

Q4 1999 46.0% 25.6% 51.7%

Q1 2000 9.9% 31.1% 5.0%

Q2 2000 8.8% 6.4% 9.4%

Q3 2000 -6.5% 5.8% -10.0%

Q4 2000 8.9% 15.4% 6.7%

Q1 2001 -12.4% 5.1% -18.7%

Q2 2001 -1.3% -2.0% -1.0%

Q3 2001 -4.1% -11.6% -0.6%

Q4 2001 -7.5% 2.1% -11.4%

Q1 2002 -8.3% -22.7% -1.6%

Q2 2002 -4.1% -18.3% 1.2%

Q3 2002 0.8% -20.2% 7.1%

Note: US total from IAB/PwC; assumed that historically 83% of AOL'sreported US advertising and commerce revenue has been advertising, percompany disclosures Q2 2002 & Q3 2002Source: Morgan Stanley Equity Research, Interactive AdvertisingBureau/PricewaterhouseCoopers, AOL Time Warner reports; November2002; eMarketer calculations, April 2003



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Another way of looking at that would be company by company. If you tookthe top 25 Web publishers, which as noted above get 89% of the adrevenue, how many of them—other than AOL—would be increasing revenuethis year in order to offset the giant’s 34.5% fall?

The problems at AOL not only disguise what’s essentially a vigorous marketbut may in fact be a blessing in disguise. That is, as ad dollars move awayfrom AOL, it may “provide more opportunities for the rest of the playerswho have already gone through the correction and restructuring period oftheir own,” according to The Silk Road Weekly, the e-newsletter from USBancorp Piper Jaffray.

“AOL is definitely an extreme case because they’restill winding down the tail end of the bigmultimillion-dollar boom-time deals.”— Jim Nail, analyst, Forrester Research; ZDNet News, 4 December 2002

Furthermore, non-AOL Web publishers such as MSN, Yahoo!, and largecontent sites like New York Times Digital went through a tough period in2001 and rebounded by late last year. For example, the online division ofThe Times reported 2002 revenues of $71.8 million for its ad-supported Website, as compared to 2001’s figure of $60.3 million, an increase of 19%. Bythe end of 2003 and into 2004, eMarketer expects a similar rebound for AOL.

By next year, then, the midsize to large online publisher will sport evenhigher revenues on average—and it won’t be just because of the gorillabellying up to the bar.

US Internet Advertising Revenue Growth with andwithout AOL's Contribution, 2001-2003 (as a %increase/decrease vs. prior year)

2001

-12.5%

3.0%

-17.9%

2002

-17.5%

-44.4%

-5.7%

2003

0.7%

-34.5%

9.8%

AOL growth Growth without AOL Total growth




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D. Online Spending Trends: 2000 to 2006From this year forward, the trend in US online advertising spending is up,according to eMarketer research, rising to $6.3 billion in 2003 from lastyear’s $6.0 billion figure, and reaching $8.1 billion by 2006.

“We saw some signs last year, but this past quarterwas the affirmation that this is a reasonablyhealthy environment for online advertising now.We’re not seeing a huge upside to expectations,but we are seeing structural changes that suggestthis is a little more of a long-term recovery.”— Safa Rashtchy, analyst, US Bancorp Piper Jaffray; The New York Times, 5

May 2003

The progress this year and the three years following centers on several factors:■ The 4.8% growth rate in 2003 will supported by a mix of more

companies including the Internet as part of their cross-mediaadvertising campaigns and a general advance for ad dollars across theboard. Even now, eMarketer believes this 4.8% increase is on theconservative side, but is waiting for Q2 and Q3 figures before adjustingits projections.

■ The 7.9% growth rate in 2004 will be supported not only by the samefactors in play in 2003 but also how next year will have both nationalelections and the Olympics, which will drive further online adspending.

■ The 5.9% growth rate in 2005 will be less than 2004’s gain because theoverall economic problems caused by deficit spending will not besolved, holding back what could be even stronger growth for online adspending as the Internet becomes more mainstream than ever.

US Online Advertising Spending, 2000-2006 (inbillions)

2000 $8.1

2001 $7.1

2002 $6.0

2003 $6.3

2004 $6.8

2005 $7.2

2006 $8.1

Note: eMarketer benchmarks its online ad spending projections against theInteractive Advertising Bureau/PricewaterhouseCoopers data, for whichthe last period measured was Q4 2002Source: eMarketer, June 2003



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■ The 12.5% growth rate in 2006 will be a positive reaction to a morestabilized economy, along with nearly all large advertisers includingthe Internet among their media buys. That nearly 50% of all US onlineusers will access the Internet via broadband is another key to double-digit ad growth.

“The Internet has become an important part of themedia mix and therefore an important ad medium.Call it convergent media or fused media or Internetadvertising or whatever you may: Internetadvertising is growing bigger by the day.”— Rishad Tobaccowala, president, Starcom IP; Slate.com, January 2003

US Online Advertising Spending Growth, 2001-2006 (asa % increase/decrease vs. prior year)

2001-11.8%

2002-15.8%

2003 4.8%

2004 7.9%

2005 5.9%

2006 12.5%

Note: eMarketer benchmarks its online ad spending projections against theInteractive Advertising Bureau/PricewaterhouseCoopers data, for whichthe last period measured was Q4 2002Source: eMarketer, June 2003



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The comparative estimates for US online advertising spending showeMarketer’s estimates about in the middle for 2003. In the years ahead,some researchers see revenues hitting double figures, such as GartnerG2’s$10.0 billion projection in 2005, Jupiter Research’s $11.6 billion in 2006,and PricewaterhouseCoopers’s $10.1 billion that same year.

The difference in absolute dollars is largely due to starting from varyingbaselines, using different definitions and methodologies. For example,eMarketer benchmarks its online ad spending projections against theInteractive Advertising Bureau/PricewaterhouseCoopers data, for which thelast full year measured was 2002. That puts the baseline at $6.0 billion. Incontrast, GartnerG2’s 2002 figure is substantially higher, at $8.7 billion, asis Veronis Suhler’s at $7.6 billion.

But when viewed by growth rates, the 2003 figures are more in line:eMarketer at 4.8%, GartnerG2 at 4.7%, and Veronis at 4.0%.

Comparative Estimates: US Online AdvertisingSpending, 2000-2006 (in billions)

CIBC World Markets, November2002

CMR/TNS, March 2003

Corzen*, January 2003

eMarketer**, June 2003



IAB/PwC, June 2003

Initiative Media, March 2003





PricewaterhouseCoopers, May2002

Salomon Smith Barney, October2002


Veronis Suhler Stevenson, July2002

2000

$8.2

$2.8

–

$8.1

–

$8.2

$8.1

–

$8.2

$5.4

$6.5

$4.3

$8.2

–

$6.5

$8.2

2001

$7.2

$6.5

$5.9

$7.1

$8.3

$7.2

$7.1

–

$7.2

$5.5

$5.5

$4.3

$7.5

–

$5.8

$7.3

2002

$6.1

$5.7

$8.6

$6.0

$8.7

$6.0

$6.0

$2.8

$6.4

$5.6

$4.8

$4.0

$7.6

$7.0

$4.9

$7.6

2003

$6.1

$6.2

–

$6.3

$9.1

$6.0

–

$2.8

$6.9

$6.2

$7.6

$4.1

$8.0

$7.6

$5.1

$7.9

2004

–

–

–

$6.8

$9.5

–

–

–

$7.7

$7.5

$9.5

$4.9

$8.6

–

–

$8.4

2005

–

–

–

$7.2

$10.0

–

–

–

$8.3

$9.5

–

–

$9.3

–

–

$8.9

2006

–

–

–

$8.1

–

–

–

–

$8.8

$11.6

–

–

$10.1

–

–

$9.3

Note: *includes revenue that local newspapers generate by upselling printadvertising into the newspaper's Web site and spending by e-mailmarketers on all aspects of their marketing operations; **eMarketerbenchmarks its online ad spending projections against the InteractiveAdvertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for whichthe last period measured was Q4 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003



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During the next several years, double-digit growth rates are expected by afew researchers, such as J.P. Morgan in 2004, Jupiter Research from 2003onwards, and the Myers Group in 2004.

“Today only 2% of ad dollars are spent online, butthe industry is overcoming legacy problems likeoveremphasizing the click-through metric andlacking reach and frequency data and cross-mediaplanning metrics.”— Gian M. Fulgoni, chairman, comScore Networks; Advertising Research

Foundation, 3 December 2002

Comparative Estimates: US Online AdvertisingSpending Growth, 2001-2006 (as a % increase/decrease vs. prior year)

CIBC World Markets, November2002

CMR/TNS, March 2003

Corzen*, January 2003

eMarketer**, June 2003



IAB/PwC, June 2003






Salomon Smith Barney, October2002



Veronis Suhler Stevenson, July2002

2001

-12.3%

130.3%

–

-11.8%

–

-12.5%

-11.8%

–

-12.2%

2.5%

-15.4%

0.0%

-8.4%

–

-11.6%

-11.9%

2002

-15.0%

-11.9%

46.7%

-15.8%

4.9%

-17.5%

-15.8%

–

-10.8%

1.0%

-13.1%

-8.0%

0.9%

–

-15.1%

4.1%

2003

0.0%

7.4%

–

4.8%

4.7%

0.7%

–

0.0%

7.2%

10.7%

59.0%

2.6%

5.3%

8.0%

5.0%

4.0%

2004

–

–

–

7.9%

4.6%

–

–

–

11.3%

21.8%

25.0%

20.0%

7.5%

–

–

6.9%

2005

–

–

–

5.9%

4.5%

–

–

–

8.3%

25.9%

–

–

8.1%

–

–

5.6%

2006

–

–

–

12.5%

–

–

–

–

5.5%

21.9%

–

–

8.6%

–

–

5.0%

Note: *includes revenue that local newspapers generate by upselling printadvertising into the newspaper's Web site and spending by e-mailmarketers on all aspects of their marketing operations; **eMarketerbenchmarks its online ad spending projections against the InteractiveAdvertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for whichthe last period measured was Q4 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003



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Even with steady growth for online advertising spending, eMarketer seesthat growth in parallel with ad spending growth in most media. That’s whythe Internet’s share of total media spending will only inch up from 2.5%last year and this year to 2.8% by 2006.

Putting together eMarketer’s Internet user and online ad spending figures,and it appears that spending has gone down relative to user growth. That is,spending per user in 2001 was $50, but IT is now only $39. However, asonline advertising increases and the growth rate among Internet usersflattens, the per-user spending will increase to $46 by 2006.

US Online Advertising Spending, 2000-2006 (as a % oftotal media spending)

2000 3.3%

2001 3.1%

2002 2.5%

2003 2.5%

2004 2.6%

2005 2.6%

2006 2.8%

Note: eMarketer benchmarks its US online ad spending projections againstthe Interactive Advertising Bureau/PricewaterhouseCoopers data, forwhich the last period measured was Q4 2002; eMarketer benchmarks itstotal US ad spending projections against Universal McCann, for which thelast period measured was 2002Source: eMarketer, June 2003


US Online Advertising Spending per Online User,2000-2006

2000 $65

2001 $50

2002 $39

2003 $39

2004 $40

2005 $42

2006 $46

Note: eMarketer's year 2000 and 2001 baselines for Internet users arefrom the International Telecommunication Union (ITU); eMarketerbenchmarks its online ad spending projections against the InteractiveAdvertising Bureau (IAB)/PricewaterhouseCoopers (PwC) data, for whichthe last full year measured was 2002Source: eMarketer, June 2003



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Jupiter sees online ad spending per user at a similar dollar level of $36 for2002 and 2003, but expects a much sharper increase in the years ahead, upto $64 by 2007.

Most discussion of online ad spending is focused on the B2C market. Andwhile that makes sense in one way, since the consumer audience is the stillthe largest one, the B2B online ad market will become more robust over thenext few years. Research from GartnerG2 on spending in the US shows theamount devoted to B2B online advertising jumping from $1.9 billion thisyear to $3.42 billion by 2005.

US Online Advertising Spending per Online Householdand User, 2001-2007

Onlinehousehold

Onlineuser

2001 $89 $39

2002 $84 $36

2003 $87 $36

2004 $99 $41

2005 $117 $48

2006 $135 $55

2007 $157 $64

Source: Jupiter Research, October 2002


US Online B2C and B2B Advertising Spending,2001-2005 (in billions)

2001

$7.02

$0.89

2002

$8.33

$1.33

2003

$9.66

$1.90

2004

$10.92

$2.60

2005

$12.06

$3.42

B2C B2B

Source: GartnerG2, April 2002



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Viewed by share of US online ad spending, B2B is projected to increasefrom 13.7% last year to 22.1% by 2005.

In fact, the growth rate for B2B online ad spending far surpasses the totalrate, according to GartnerG2.

US Online B2C and B2B Advertising Spending,2001-2005 (as a % of total spending)

2001

88.7%

11.3%

2002

86.3%

13.7%

2003

83.6%

16.4%

2004

80.8%

19.2%

2005

77.9%

22.1%

B2C B2B



US Online B2C and B2B Advertising Spending Growth,2002-2005 (as a % increase vs. prior year)

B2C B2B Total

2002 18.8% 48.7% 22.1%

2003 15.9% 43.1% 19.6%

2004 13.1% 37.2% 17.1%

2005 10.4% 31.5% 14.5%




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When the interactive spending focus is turned to direct marketing alone,research from the Direct Marketing Association indicates that B2Bcompanies spend more than B2C firms. In each of the four years shown,B2B companies spend about 60% of the annual Internet-based directresponse total. The projections from the DMA say that B2B spending willreach $5.0 billion by 2006.

One last Internet ad spending trend for this section is a cross-media one:the revenues and sales and marketing spending—plus sales and marketingspending per dollar of revenue—for publicly traded Internet-centriccompanies. It’s cross-media, because many of these companies market theirenterprises at least partially offline as well as online.

Even for some of the larger Web sites, sales and marketing spendingconsumes a relatively large portion of their revenues. Take Yahoo! as oneexample; with $953 million in revenues in 2002, the portal spent 45 centsper revenue dollar in sales and marketing. That’s a similar level of spendingto CBS MarketWatch.com, at 46 cents of each revenue dollar spent onmarketing endeavors.

Advertising Spending for Direct Marketing InteractiveMedia among US B2C and B2B Companies, 2000-2002& 2006 (in billions)

2000

$1.2

$2.0

$3.2

2001

$1.4

$2.2

$3.5

2002

$1.6

$2.5

$4.0

2006

$3.3

$5.0

$8.4

B2C B2B Total

Source: Direct Marketing Association, July 2002



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Other major sites spent less than the average 33 cents per revenue dollar,such as eBay at 29 cents, Priceline.com at 8 cents, and Amazon.com at amere 3 cents.

Publicly Traded US Internet-Centric CompaniesRevenues and Sales & Marketing Spending, 2002 (inmillions)

Revenues Sales &marketingspending*

Sales &marketing

spending perdollar of

revenue**

Audible $12.4 $12.5 $1.01

SportsLine.com $62.1 $48.4 $0.78

InsWeb $25.6 $18.4 $0.72

Homestore $264.5 $187.8 $0.71

Autobytel $80.9 $49.3 $0.61

IGN Entertainment $11.4 $5.8 $0.51

MarketWatch.com $44.5 $20.5 $0.46

Yahoo! $953.1 $428.9 $0.45

LendingTree $111.4 $50.1 $0.45

iVillage $59.4 $24.4 $0.41

Knot $29.5 $11.2 $0.38

US Search.com $30.3 $11.2 $0.37

Alloy $299.3 $107.7 $0.36

Switchboard $11.7 $4.0 $0.34

TheStreet.com $20.8 $7.1 $0.34

CNet Networks $237.0 $75.8 $0.32

EarthLink $1,357.4 $407.2 $0.30

Bluefly $30.6 $8.9 $0.29

eBay $1,214.1 $352.1 $0.29

Bankrate $26.6 $7.4 $0.28

Quotesmith.com $10.8 $2.9 $0.27

Multex.com $92.4 $22.2 $0.24

United Online $167.5 $40.2 $0.24

LookSmart $96.0 $21.1 $0.22

WorldGate Communications $13.9 $2.6 $0.19

Stamps.com $16.3 $2.4 $0.15

Edgar Online $16.2 $2.3 $0.14

Ameritrade $430.8 $60.3 $0.14

Drugstore.com $193.9 $25.2 $0.13

Barnes & Noble.com $422.8 $33.8 $0.08

Overture Services $667.7 $53.4 $0.08

Priceline.com $1,003.6 $80.3 $0.08



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All these figures for online ad spending overlook one important aspect ofthe Internet—the billions of dollars companies pay out for various indirectforms of advertising, promotion, and marketing. For example, an articlefrom MediaPost referred to “content integration,” or implicit advertising.“Pharmaceutical firms including Pfizer have been pushing product subtlythrough educational ‘advocacy’ sites that inform consumers about topicslike lowering cholesterol. The FAQ-type sites stay away from heavybranding, but surely are considered part of overall online marketingstrategies. This is just the sort of online ad spend that doesn’t necessarilyshow up in ad-seller revenue reports.”

SoundView Technology Group $108.6 $7.6 $0.07

Charles Schwab Corp. $4,135.0 $206.8 $0.05

Amazon.com $3,932.9 $118.0 $0.03

Average $462.6 $71.9 $0.33

Note: *sales and marketing "expenses typically include money foradvertising, marketing staff salaries and other costs related to marketingand selling"; **in dollarsSource: Pegasus Research International, Advertising Age, Taylor NelsonSofres' CMR, US Securities and Exchange Commission, Bloomberg,eMarketer calculations, April 2003



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Viewed as a promotional vehicle, the Internet continues to get an increasedshare of spending. Research from Promo Magazine found that 15.4% of US marketers concentrated most of their promotional budget in variousonline endeavors.

Promotion Vehicles toward Which US MarketersConcentrated Most of Their Budget, 2002 (as a % ofrespondents)

Direct mail 36.0%

Event marketing 29.7%

P-O-P displays 23.4%

Games, contests, sweeps 20.6%

Ad specialties 19.4%

Coupons 17.1%

Premium incentives 17.1%

Sponsorship 17.1%

Co-op marketing 15.4%

Online 15.4%

Research 13.1%

In-store services 10.3%

Tie-ins/alliances 10.3%

Trade shows 9.7%

Sampling 9.1%

Entertainment tie-ins 5.7%

Licensing 4.6%

Other 4.6%

Source: Promo Magazine/Promotion Marketing Association, April 2003



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E. Online Forecasts: MethodologiesAnalyzedDiverse estimates for online advertising spending can be confusing,misleading, and frustrating. However, even as spending projections comefrom a mixture of knowledge and guesswork, and even as various projectionstell different stories, there’s often simple logic behind the numbers.

In trying to understand where spending figures come from, two basicquestions need to be answered: What is being measured? And, how is itbeing measured? Once those questions are answered, as several researchersdid for eMarketer, the difference between the numbers becomes a lot clearer.

For example, the figures from several researchers take in the same adformats as measured by the Interactive Advertising Bureau andPricewaterhouseCoopers, the benchmark source for eMarketer’s online adspending estimates. The other companies that include the IAB/PwC formatsare CIBC World Markets, GartnerG2, Universal McCann, and Veronis SuhlerStevenson. The same is true for the Myers Group, except it doesn’t counttwo minor ad vehicles: slotting fees and referrals.

Take CMR/TNS as another example. While it measures all types of bannersand some interstitials, it does not include formats such as rich media, paidsearch, or sponsorships—and therefore its Internet ad spending figures aretypically less than other researchers. There’s nothing wrong with that, perse, as long as you know what elements go into the final figures.

While the what-is-measured side is somewhat standardized, as isexpected, the how-it-is-measured side offers great variety. CIBC, for one,tracks and extrapolates, but says it’s “not a formal survey.” CMR/TNS usesits Evaliant unit to research rate cards for online ad pricing, and then worksoff that base. GartnerG2 uses SEC filings and conducts personal interviewswith the top 20 sites that sell advertising. Universal McCann’s methodologyis grounded in the US Census Bureau’s annual survey of online informationsuppliers. And the Myers Group estimates future spending through a panelof advertising executives.

When researchers describe their methodologies, it creates greaterunderstanding for companies trying to use the spending data. That’s trueeven if the methodology is somewhat obfuscated, as in PwC’s separatesurvey with Wilkofsky Gruen where they “generate advertising forecaststhrough mathematical models.”


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Why some companies—especially investment banks such as GoldmanSachs, J.P. Morgan, Lehman Brothers, and Salomon Smith Barney—refuseto disclose their methodology for measuring online advertising spending isessentially understandable. With big money clients at stake, they believethe “secret-sauce” approach wins the game among the banks more oftenthan does transparency. However, it is somewhat surprising that thesefinancial services firms—and others—will not disclose simply which onlinead formats they include in their published measurements.

Online Ad Spending: What Is Measured? How Is ItMeasured?, 2003

CIBC WorldMarkets

CMR/TNS

Corzen

eMarketer

GartnerG2

What is measured(ad formats)

Same as IAB/PwC

Includes:• banners (all types)• some interstitial Does not include:• slotting fees streaming media• sponsorship• paid search rich media• e-mail• classifieds• referrals

–

Same as IAB/PwC

Same as IAB/PwC

How it is measured(methodology)

Tracks all companies onthe services side and mediaside, then extrapolates thewhole sector. Based onhistorical IAB/PwC numbersand the outlook for companies;not a formal survey, but usesinterviews to indicate trends.

Evaliant collects rate cardsfrom most of the sites tracked;where a site does not supplyits rate card, substitutes acategory average derived fromother sites within that site'scategory profile. Then appliesfactors to the rate card valuesdriven by industry study ofpublic domain revenue data(e.g. SEC filings). These factorsare further guided by agencyand advertiser input andindustry trends.

Proprietary modeling based ongovernment sources-includingUS Census, Bureau of LaborStatistics, and SEC-Dun &Bradstreet, and market levelmedia usage.

Aggregates and analyzesinformation from allsources. Normalizes andweighs data. Developsprojections based on thebest fit with all theavailable data. IdentifiesIAB/PwC as the benchmarkfor historical periods.

Uses SEC filings and conductspersonal interviews with thetop 20 sites that sell advertising(top 20 are determined byvolume of ads served).



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GoldmanSachs

IAB/PwC

J.P. Morgan

JupiterResearch

LehmanBrothers

Myers Group

Pricewaterh-ouseCoopers &Wilkofsky GruenAssociates

SalomonSmith Barney

UniversalMcCann

Veronis SuhlerStevenson

–

• online display & proprietary systems (including banners, skyscrapers, etc.)• interstitials• slotting fees• rich media• e-mail• classifieds• streaming• sponsorship• keyword (paid search)• referral

–

–

–

Same as IAB/PwC,except does not include:• slotting fees• referrals

–

–

Same as IAB/PwC

Same asIAB/PwC

n/a

Confidential survey tointeractive media companies;validated via public records andPwC audit records. Compiledata from over 100 companies,including non-public firms (datashown only in aggregate).

n/a

n/a

n/a

Primary surveys fielded regularlyby panel of advertisingexecutives; asks marketers, adagency executives, mediabuyers, and planners toestimate their future spending.

Use third-party sources;generate advertising forecaststhrough mathematical models.

Partnered with Avenue A tocome up with latest researchforecast.

Based on US Census Bureau'sannual survey of onlineinformation suppliers; skewedso the biggest suppliers are init (10,000 establishments).Formulates projections bylooking at industry trend data,including other media.

Uses IAB/PwC for historicaldata; uses CMR (top 10advertisers and top 10advertising categories) forprojections. Does not use anyindependent survey researchin the consumer space.

Note: when information is cited as not available (n/a), that is because thecompany refuses to disclose the specific online ad formats it tracks or howit calculates past, current or projected online ad spending dollarsSource: eMarketer, June 2003; various, as noted, 2002 & 2003



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F. Online Ad Format SpendingWhile the diverse vehicles that make up the online advertising universehave not yet reached some Biblical the-first-shall-be-last stage, they havebeen going through diverse sea changes during the past three years.

For illustration’s sake, two examples: The share of US online advertisingspending devoted to banners shrank from 46.8% in 2000 to 29.4% in 2002,a 17.4-point fall. Meanwhile, spending on keyword search (also called paidsearch) rose from a 1.3% share to 15.4%, or a 14.1-point gain.

In addition, the use of online sponsorships has dropped by 10.2 pointsduring the three-year period, while classifieds have increased their marketshare by 7.6 points.

US Online Advertising Spending, by Vehicle, 2000-2002(as a % of total spending)

Banners

46.8%

35.4%

29.4%

Sponsorships

28.4%

26.5%

18.2%

Keyword search

1.3%

4.2%

15.4%

Classifieds

7.4%

15.7%

15.0%

Slotting fees

7.8%

8.0%

Interstitials

3.7%

3.0%

5.0%

Rich media

2.0%

2.5%

5.0%



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As the ad formats continue to change places, total online spending hasdecreased by about $2 billion. What that means for specific online vehiclesis a spending shift during the three-year span shown below, whereincreased gains are found for only four formats: keyword search,classifieds, rich media, and (barely) e-mail.

US Online Advertising Spending, by Vehicle, 2000-2002(in millions)

Banners

$3,783.2

$2,526.4

$1,764.4

Sponsorships

$2,293.6

$1,889.7

$1,092.8

Keyword search

$108.5

$298.7

$927.4

Classifieds

$601.3

$1,118.4

$901.5

Slotting fees

$553.0

$480.8

E-Mail

2.7%

2.7%

4.0%

Referrals

4.3%

2.0%

1.0%

2000 2001 2002





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Interstitials

$301.5

$214.0

$300.5

Rich media

$160.6

$176.8

$300.5

E-Mail

$219.6

$195.6

$240.4

Referrals

$347.2

$142.7

$60.1

2000 2001 2002




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When you view that spending by growth rates, the astounding increases forpaid search become clear, with triple-digit increases in both 2001 and 2002.And, as is obvious to most people who spend time on the Web, rich mediaand interstitial (including pop-up) ads are also rising, with growth rates ofapproximately 70% and 40%, respectively, last year—albeit from small bases.

US Online Advertising Spending, by Vehicle, 2001 &2002 (as a % increase/decrease vs. prior year)

Keyword search

175.3%

210.5%

Rich media

10.1%

69.9%

Interstitials

-29.0%

40.4%

E-Mail

-11.0%

22.9%

Slotting fees

-13.1%

Classifieds

86.0%

-19.4%

Banners

-33.2%

-30.2%

Sponsorships

-17.6%

-42.2%

Referrals

-58.9%

-57.9%

2001 2002




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Banner AdsFrom a 46.8% share of all US online advertising spending in 2000, bannersin 2002 fell to 29.4% of the spending pie.

The spending on banners last year was more than $2 billion less than onlytwo years earlier, dropping to $1.76 billion. This drop was due both toshrinkage in total ad spending—from $8.09 billion in 2000 to $6.01 billionin 2002—and banners’ reduced portion of the online pie.

With all this, it’s worth remembering that even as spending on bannersdecreases, more money goes into the format than any other online vehicle.The banner is not dead; it’s just finding its place as the basic and essentialdisplay ad.

Banner Ad Spending in the US, 2000-2002 (as a % oftotal spending)

2000 46.8%

2001 35.4%

2002 29.4%



Banner Ad Spending in the US, 2000-2002 (in millions)

2000 $3,783.2

2001 $2,526.4

2002 $1,764.4




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Online SponsorshipCompared to the growth of formats such as paid search and rich media,sponsorships are more like banner ads—both have retained their status asone of the two most used online ad vehicles and both have lost marketshare over the past three years.

In 2002, 18.2% of the US online spending went into sponsorships, agreater than 10-point drop from 2000’s figure.

Actual 2002 spending reached $1.09 billion, a significant decrease from$1.89 billion the year before.

Online Sponsorship Ad Spending in the US, 2000-2002(as a % of total spending)

2000 28.4%

2001 26.5%

2002 18.2%



Online Sponsorship Ad Spending in the US, 2000-2002(in millions)

2000 $2,293.6

2001 $1,889.7

2002 $1,092.8




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Search AdvertisingThe most recent online search spending figures from the InteractiveAdvertising Bureau and PricewaterhouseCoopers clearly show itstremendous growth, going from a single-digit share of the interactive advehicle market in 2000 and 2001 to a 15.4% slice in 2002.

“Paid search is the new gold.”— Gary Stein, analyst, Jupiter Research; San Jose Mercury-News, 7

April 2003

Translated to absolute dollars, advertisers last year spent nearly $1 billionon various forms of paid search.

Online Search Ad Spending in the US, 2000-2002 (as a% of total spending)

2000 1.3%

2001 4.2%

2002 15.4%



Online Search Ad Spending in the US, 2000-2002 (inmillions)

2000 $108.5

2001 $298.7

2002 $927.4




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The figures below unmistakably show search advertising’s spectaculargrowth, going from a strong 175.3% gain in 2001 to an even stronger210.5% gain in 2002.

“In reality, pay-per-click search is not search at all—it’s text advertisements disguised as actualsearch results.”— Fredrick Marckini, CEO, iProspect; avant|marketer

Online Search Ad Spending in the US, 2001 & 2002 (asa % increase vs. prior year)

2001 175.3%

2002 210.5%




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Online Classified AdsThe hurting economy is also hurting online classified spending. With thetight job market in the US, there were fewer help-wanted ads last year thanin 2001, both offline and online. Even so, estimates from the IAB/PwCstudy show that online classified spending made up 15.0% of last year’s$6.01 billion total, down from 2001’s figure of 15.7% and just a bit lessthan paid search’s 15.4% share.

Even with fewer recruitment ads, the success of auction sites, mostnotably eBay, keeps the classified format healthy.

Total spending for online classifieds dropped below $1 million last year to$901.5 million.

“The growth of classified advertising really is a storyabout cannibalization. What we saw is that offlineclassifieds declined about 15% last year, whileonline classified spending increased 38%. We’veseen a shift in consumer behavior because online isessentially cheaper, more efficient, faster.”— Marissa Gluck, senior analyst, Jupiter Research; CNNfn, 2 May 2002

Online Classified Ad Spending in the US, 2000-2002 (inmillions)

2000 $601.3

2001 $1,118.4

2002 $901.5



Online Classified Ad Spending in the US, 2000-2002 (asa % of total spending)

2000 7.4%

2001 15.7%

2002 15.0%




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Rich MediaAccording to research from the IAB and PwC, for all the attention richmedia gets from both users and the online advertising industry alike,spending on the format made up only 5.0% of the total for 2002. However,that share doubled the 2001 figure of 2.5%.

“It’s time for us to use online as a way to delivertelevision commercials for our clients. Realbroadband opportunities are starting to present themselves.”— Jack Klues, chief executive officer, Starcom Mediavest; Forbes.com, 23

May 2003

And even though rich media ads are more expensive to run than mostbanner ads, the actual dollars reached only $300.5 million in 2002.

Rich Media Ad Spending in the US, 2000-2002 (as a %of total spending)

2000 2.0%

2001 2.5%

2002 5.0%



Rich Media Ad Spending in the US, 2000-2002 (inmillions)

2000 $160.6

2001 $176.8

2002 $300.5




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Interstitials & Pop-Up AdsIn 2002, interstitials’ share of US online ad spending was 5.0%, the same asfor rich media. Also like rich media, the 2002 share rose slightly over the2001 figure. The increased portion of spending going to interstitials ispartially due to a greater use of pop-ups.

“Isn’t that what advertising is supposed to be?Intrusive?”— Jim Meskauskas, chief strategic officer, Underscore Marketing;

MediaPost, 7 February 2002

Interstitial spending in 2002 totaled $300.5 million, up from $214.0 millionin 2001.

Interstitial Ad Spending in the US, 2000-2002 (as a % oftotal spending)

2000 3.7%

2001 3.0%

2002 5.0%



Interstitial Ad Spending in the US, 2000-2002 (inmillions)

2000 $301.5

2001 $214.0

2002 $300.5




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E-Mail AdvertisingWhen it comes to e-mail, the measured ad spending figures below do notconstitute the entire e-mail spending pie. That’s because the vast majorityof e-mail dollars fall into some form of marketing, not necessarily adsembedded in commercial e-mails.

That said, like rich media and interstitials, e-mail advertising increasedits market share by a small amount last year, rising by 1.3 points to 4.0% oftotal spending.

In absolute dollars, that means e-mail advertisers spent $240 million in 2002.

“The number of e-mails people receive will onlycontinue to increase. Our job is to break through,and that starts by targeting your e-mail and onlysending information to those you know have askedfor it.”— Adam Deringer, director, WebFingerprint; MediaPost, 12 August 2002

For hundreds more charts and analysis about the various onlineadvertising vehicles, including further spending figures, seeeMarketer’s companion report “Online Advertising Tactics” at:http://www.emarketer.com/products/report.php?advert_on_tact_jul03

E-Mail Ad Spending in the US, 2000-2002 (as a % oftotal spending)

2000 2.7%

2001 2.7%

2002 4.0%



E-Mail Ad Spending in the US, 2000-2002 (in millions)

2000 $219.6

2001 $195.6

2002 $240.4



http://www.emarketer.com/products/report.php?advert_on_tact_jul03


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G. Plans for Online Ad SpendingMeasured by intent, online advertising is generally looking up. Forexample, in a recent survey from GartnerG2—as reported by Forbes.com inMay 2003, “Ad agencies said they plan to bump up clients’ online spendingfrom 5.5% of their budgets to 6.8% by year’s end, and up to 9% by theclose of 2004.”

And in a survey from last August, 71.2% of the 176 US media andadvertising polled by the Myers group said they planned to increase theironline ad spending during the upcoming 12 months.

Decrease7.6%

Remain the same21.2%

Increase71.2%

Online Advertising Spending Plans for the Next 12Months among US Advertising Executives, August2002 (as a % of respondents)

Note: n=176Source: Myers Group, October 2002



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The drill-down version of the same Myers survey found plans for relativelystrong spending increases, with nearly one-third of those who plan tospend more saying the increase would be in the 20% to 50% range.

Online Advertising Spending Plans among USAdvertising Executives for the Next 12 Months,August 2002 (as a % of respondents)

Increase less than 20%

19.1%

Increase 20% to 50%

32.4%

Increase 51% to 75%

8.7%

Increase 76% to 100%

2.9%


4.0%


2.3%


0.6%

Increase 300% or more

1.2%

Total Increase

71.2%

Remain the same

21.2%

Decrease less than 20%

4.6%

Decrease 20% to 30%

0.6%

Decrease 31% to 40%

0.6%

Decrease 41% to 50%

1.2%

Decrease 50% or more

0.6%

Total Decrease

7.6%




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Spending for interactive marketing, in general, will see a 0.6% increase in2003, according to a study from Havas, the Paris-based advertising agency,and the London Business School. That figure may be small, but it’s greaterthan for other categories such as media advertising, sales promotion, anddirect mail.

“Online tracks as traditional media does. Whenbudgets are flush, people are spending, and whenbudgets are tight, it gets tight across the board.”— George Shabab, senior vice president, CMR; Interactive Advertising &

Branding News, 1 April 2002

The increases for spending allocation are based in more effective use of theInternet. The Wall Street Journal reported, “The study’s authors explainthat marketers now are using the Web for more than Internet ads, and theylike what they see. E-mail marketing and Web sites, for instance, haveproved to be useful tactics not only to drive sales but also to gatherinformation about customers.”

Marketing Spending Allocation in the US, by Category,2002 & 2003 (as a % increase/decrease vs. prior year)

Media advertising

-1.0%

0.4%

Sales promotion

0.1%

-1.0%

Direct mail

0.4%

0.1%

PR/sponsorship

-0.3%

-0.3%

Interactive marketing

0.7%

0.6%

2002 2003

Note: n=228 chief marketing officersSource: London Business School/Havas, December 2002



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Good news like that from GartnerG2, Myers, and Havas is certainly welcomeby the lately beleaguered online ad industry. The economy’s rundown statehas put many ad budgets on a diet, as spending remains under fire. WhenInsight Express asked over 1,000 US media planners earlier this year, in asurvey sponsored by MediaPost, if they agreed with the statement that thecurrent economy significantly impacts this year’s media budgets, 52% cameout in the affirmative. In contrast, only 19% of the ad-industry peoplebelieve that the economy does not affect their media budgets.

That take on the connection between a flatlined economy and USadvertising is why 64% of those same planners believe their jobs will betougher in 2003 than in 2002.

“Many people hunkered down to survive through the sluggish economy in 2002.The outlook for 2003 appears to be completely different, almostdiametrically opposed.Three times as many peopleanticipate spending increases as those who expectfurther cutbacks.”— Craig Shields, partner, Patrick Marketing Group; MediaPost, 7 October 2002

US Media Planners’ Opinions Regarding Whether theEconomy Significantly Impacts Media Budgets, 2003(as a % of respondents)

Agree 52%

Neutral 29%

Disagree 19%

Note: n=1,092Source: MediaPost, InsightExpress, February 2003


US Media Planners’ Opinions Regarding Whether theirJobs Will Be Tougher, 2003 vs. 2002 (as a % ofrespondents)

Agree 64%

Neutral 23%

Disagree 13%




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But budgets, like plans, are made to be changed. That plans concerningspending are particularly flexible might be an understatement. TheMediaPost survey also found that one-third of US media professionals plantheir budgets quarter by quarter, while about the same amount plan annually.

But note that nearly one in five plan spending only one month inadvance, ready to shift in response to client, market, or economic changes.

The same MediaPost survey found that of the 487 respondents who plan tospend more this year, 36% will increase budgets for online advertising—more so than for cable TV, radio, or any other media.

How Far in Advance Do US Media Professionals PlanSpending, 2003 (as a % of respondents)

One month 18%

One quarter 33%

Bi-annually 12%

Yearly 31%

Other 6%



Ad Media that US Media Planners Will Be SpendingMore on in 2003 (as a % of respondents)

Online 36%

Cable TV 31%

Radio 23%

Network TV 19%

Magazines 18%

Outdoor 13%

Newspaper 11%

Note: n=487, those media planners who said they'd be spending more thisyearSource: MediaPost, InsightExpress, February 2003



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Note, however, that just because more of these media planners intend toincrease spending for online ads, it doesn’t mean more will be spent foronline than for other media. In fact, 23% of the 1,092 respondents said theyexpect to focus most of their media spending on network TV. However, 19%cited the Internet as their prime focus for media ad spending—which if truewould indicate a substantial increase for US online ad spending this year.

And of the 191 respondents to the MediaPost survey who said they’d bespending less this year for advertising, most cited radio, outdoor ads, andnewspapers as the media targeted for decreased spending. Only 13%mentioned the Internet, the same figure as for cable TV.

Other14%

Outdoor1%

Cable TV8%

Radio9%

Newspaper10% Magazines

16%

Online19%

Network TV23%

Where US Media Planners Expect to Focus Most ofTheir Media Spending in 2003 (as a % of respondents)



Ad Media that US Media Planners Will Be SpendingLess on in 2003 (as a % of respondents)

Radio 20%

Outdoor 20%

Newspaper 20%

Magazines 18%

Network TV 16%

Online 13%

Cable TV 13%

Note: n=191, those media planners who said they'd be spending less thisyearSource: MediaPost, InsightExpress, February 2003



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“It’s been pretty easy for big advertisers to try a lotof different things on the Web, because themedium is so inexpensive right now. They canafford to stick with 3% of the budget, and try tofigure out what works.”— Charles Buchwalter, vice president of client analytics,

Nielsen//NetRatings; The New York Times, 24 June 2002

What are the most important elements that will sway advertisingexecutives to increase their online ad spending? According to a MyersGroup survey from last year, the three most influential issues are improvedconversion rates, the increasingly effective creative opportunities, andimproved research capabilities.


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Issues US Advertising Executives Rate as “Very” or“Extremely Influential” for Increasing Online AdSpending in the Next 12 Months, August 2002 (as a %of respondents)

Improved online conversion rates

69.9%

Increasingly effective creative opportunities

64.9%

Improved research capabilities

61.0%

Lower CPMs

54.3%

Overall media budget increases

53.5%

Improved click-through rates

53.2%

Increased emphasis on branding

51.7%

Lower production costs

41.2%

Improved sales competence

40.4%

Lower administrative costs

38.4%

Increased market consolidation

25.1%

Improved stewardship of schedules

24.6%

Independently audited post-buy data

24.4%

Standard production requirements

22.8%

Greater Web site compliance with creative standards

22.2%




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H. Pricing Models, Pricing TrendsAs the previous chart from the Myers Group indicates, lower CPMs (cost perthousand) is an issue that can influence over 54% of advertisers to increasetheir online ad spending. Pricing by CPMs is typically applied to ad formatssuch as banners, rich media, or interstitials, where the measured“thousand” is the ad impression.

Here’s how an impression’s CPM might be calculated: A Web publisher thatcharges $1,200 per ad and reports 75,000 visits has a CPM of $16 ($1,200divided by 75). This pricing model is also called cost-per-view (CPV).

Another common pricing method for online ads is performance based.The main performance measurements include:

■ Cost-per-click (CPC), where advertisers pay on the basis of how manyusers click on their ads. Many online publishers resist this pricingmodel, since click-throughs have dropped greatly.

■ Cost-per-action (CPA) is an expanded version of CPC, since with thismeasurement the cost of an ad is based on the user taking somespecifically defined action in response to an ad, such as registering onthe advertiser’s Web site.

■ Cost-per-lead (CPL), where advertisers with an offer or promotionspecify the number of leads they want to generate, and pay only forthose that are delivered.

■ Cost-per-acquisition (CPA) is similar to CPL, but in this case,advertisers pay only when users make an actual purchase oracquisition. (Also called “cost-per-buy” or “cost-per-sale.”)

“It’s also much less costly doing marketing onlineversus TV and/or print. Not only for our brands, butfor the smaller brands that have to be frugal.”— Jean Pundiak, senior e-marketing manager, AstraZeneca; iMedia

Connection; 16 January 2003


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Within this alphabet soup of CPMs and CPCs, which pricing model worksbest depends on the advertiser’s objectives and the publisher’s needs, aswell as both sides’ tolerance levels for absorbing financial risk. The weakeconomy has also caused a shift in pricing models, according to theIAB/PwC research. While 45% of US online ad revenues in 2002 came fromCPM pricing, about the same as the previous two years, a shift to payingonly for what you get means that performance deals garnered 21% ofrevenues, up from 12% in 2001.

US Online Advertising Revenues, by Pricing Model,2000-2002 (as a % of total revenues)

CPM or impression

43%

48%

45%

Hybrid

47%

40%

34%

Performance deals

10%

12%

21%

2000 2001 2002

Source: Interactive Advertising Bureau (IAB)/PricewaterhouseCoopers(PwC), June 2003



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That shift meant revenues based on performance deals grew by 47.4% in2002, the only pricing model with revenue growth.

US Online Advertising Revenue Growth, by PricingModel, 2001 & 2002 (as a % increase/decrease vs.prior year)

CPM or impression

-1.5%

-21.0%

Hybrid

-24.9%

-28.4%

Performance deals

5.9%

47.4%

2001 2002




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Advertisers spent $1.26 billion on ads bought through performance dealslast year, $2.70 billion using CPM deals, and a bit over $2 billion usinghybrid pricing that mixes elements of CPM’s guaranteed price andperformance’s accountability.

“The Internet will transform advertising because ofits trackability, not its beauty.”— Eric Schmidt, chairman and CEO, Google; Jupiter/IAB Ad Forum,

October 2002

US Online Advertising Revenues, by Pricing Model,2000-2002 (in billions)

CPM or impression

$3.48

$3.42

$2.70

Hybrid

$3.80

$2.85

$2.04

Performance deals

$0.81

$0.86

$1.26

2000 2001 2002




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Jupiter Research offers a somewhat different way of defining pricingmodels, adding sponsorship to the list along with impression’s CPM andpay-for-performance. In 2002, 42.5% of deals were priced by impression,similar to the IAB/PwC’s 45%. But Jupiter sees performance deals as astronger component, at 26.2% last year—compared to 21% from theIAB/PwC—and growing to one-third of all pricing by 2007.

Translated to dollars, Jupiter expects $1.3 billion to be spent onperformance deals in 2003, while $2.0 billion will be spent on animpression basis.

Even as a greater percentage of online ad deals are made pay-for-performance, CPM payments still prevail among pricing models. Not onlydo publishers prefer them, but as CPM prices fall, they become moreattractive to advertisers too. According to Jupiter, the average effectiveCPM in 2002 dropped by 21.4% to $2.04. (Effective means afterdiscounting and other negotiations.)

US Online Advertising Spending, by Pricing Model,2001-2007 (as a % of total media buys)

Impression Sponsorship Performance

2001 42.7% 32.6% 24.8%

2002 42.5% 31.3% 26.2%

2003 42.4% 30.0% 27.7%

2004 42.2% 28.6% 29.1%

2005 42.1% 27.3% 30.6%

2006 41.9% 26.0% 32.0%

2007 41.8% 24.7% 33.5%

Note: excludes online classified advertisingSource: Jupiter Research, October 2002


US Online Advertising Spending, by Pricing Model,2001-2007 (in millions)

Impression Sponsorship Performance

2001 $1,909 $1,459 $1,108

2002 $1,850 $1,361 $1,141

2003 $2,017 $1,426 $1,317

2004 $2,492 $1,690 $1,719

2005 $3,206 $2,082 $2,330

2006 $3,971 $2,463 $3,034

2007 $4,870 $2,878 $3,903

Note: does not include online classified advertisingSource: Jupiter Research, October 2002



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“Online marketing is cheap, and it works.”— Denise Garcia, director of research, GartnerG2; MediaPost, 30 May 2002

After another average CPM decrease this year, down by 5.9% to $1.93,Jupiter expects a turnaround from the current buyer’s market in 2004. Inthat year and the three following, the firm predicts a steady double-digitrise in CPM pricing for online advertising, reaching $3.26 by 2007. The twomain factors behind CPM growth are better targeting for ads, which makethem more valuable, and increased use of rich media ads, which simply costmore to implement.

Those increased CPMs will lead to a win-win situation. More effectivetargeting is one key to establishing the Internet as a tool for both directresponse and branding. And rich media’s use for branding is somethingthat’s drawing in the larger companies, plus some content sites are findingthey can charge more. It’s one way that both the advertiser and thepublisher see potential benefits.

Effective CPM for US Online Advertising, 2001-2007

2001 $2.60

2002 $2.04

2003 $1.93

2004 $2.12

2005 $2.45

2006 $2.79

2007 $3.26



Effective CPM for US Online Advertising, 2002-2007 (asa % increase/decrease vs. prior year)

2002-21.4%

2003-5.9%

2004 10.1%

2005 15.7%

2006 13.6%

2007 17.0%




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For now, Nielsen//NetRatings sees a wide range in rate-card CPM (meaningthe non-negotiated, non-discounted CPM). During the last two quarters of2002, the average CPM for full banner ads peaked at $52.50 on B2B Websites; hovered in the teens on sites such as news, health, and travel; andwere less than $5 on movie, search engine, and gaming sites, for example.

Average Full Banner Rate Card* in the US, by Web SiteGenre, Q3 2002-Q4 2002 (in dollars per thousandimpressions)

B2B

$52.50

Automotive

$37.86

Computing and technology

$28.19

Home garden

$25.00

Local and regional

$25.00

Yellow and white pages

$25.00

Sports and recreation

$22.00

Business anad finance

$20.00

General news

$17.96

Fashion, romance and celebrity

$16.71

Reference and education

$15.52

Health and fitness

$15.00

Community

$13.00

Employment

$11.00

Travel

$11.00



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Portal

$10.70

ISP and telecommunications

$9.57

Kids and family

$9.50

Shopping and auction

$5.33

Incentive

$4.00

Movies and television

$3.50

Personal expression

$2.00

Search engine

$1.75

Games

$0.75

Note: data limited to the advertising technologies and Web sites thatNielsen//NetRatings' AdRelevance service tracks; AdRelevance does notprobe inside the AOL proprietary network; *rate card meansnon-negotiated valueSource: Nielsen//NetRatings, January 2003



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Transaction TypesNo matter the pricing model, and regardless of the specific price, cash dealsmade up 90% of all online advertising transactions in 2002, according tothe IAB/PwC researchers, accounting for $5.41 billion in revenues.

But with some advertisers and Web sites still hurting financially, there’sbeen a rise in barter deals, at 10% of total revenues in both 2001 and 2002.

US Online Advertising Revenues, by Transaction Type,2000-2002 (as a % of total revenues)

Cash

93%

89%

90%

Barter/trade

6%

10%

10%

Packaged deals

1%

1%

0%

2000 2001 2002




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US Online Advertising Revenues, by Transaction Type,2000-2002 (in billions)

Cash

$7.52

$6.35

$5.41

Barter/trade

$0.49

$0.71

$0.60

Packaged deals

$0.08

$0.07

$0.00

2000 2001 2002



IIIMethodology 7




A. Spending Plans for Total Media 90


C. The Offline Ad Market 98

D. Broadcast Spending 112

E. Print Spending 116

F. Other Offline Spending 121



Index of Charts 237


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While some marketers offer reasons for increasing or decreasing online adspending based solely on their analysis of the Internet’s effectiveness, theinfluences on ad spending allocation are increasingly part of cross-mediaobjectives. That is, you can’t estimate where online ad spending is goingwithout looking also at offline spending.

A. Spending Plans for Total MediaResearch by InsightExpress, sponsored by MediaPost, found that 45% of USmedia planners intend to increase their entire media budgets in 2003.Nearly as many, or 38%, expect no change in budgets; and only 17% saidthey’d be shrinking ad spending.

Remain the same38%

Decrease17%

Increase45%

US Media Planners’ Opinions Regarding the Change inSize of Media Budgets in 2003 (as a % of respondents)




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More optimistic media spending plans came out of DoubleClick’s researchfrom December 2002. Among the 51% of companies expecting budgetincreases, the average increase is 11%. And only 6% of marketers said theyplanned to decrease budgets.

However, like researcher estimates, advertiser spending plans are a movingtarget. While 67.5% of the US marketers surveyed by the Myers Group saidthey intend to increase advertising and marketing budgets in 2003, thelargest portion (45%) pointed to mild budget increases in the 1% to 8% range.

Budgetdecrease6%

Stay the same43%

Budget increase51%

Change in Marketing Budget among US Marketers,2003 vs. 2002 (as a % of respondents)

Note: n=200Source: DoubleClick, December 2002


US Marketers' Intent to Increase or DecreaseAdvertising and Marketing Budgets, 2003 (as a % ofrespondents)

Note: n=143Source: Myers Group, December 2002


Increase budgetby 1% to 8%45.0%

Increase budgetby more than 8%22.5%

Decreasebudget

12.5%Stay the same20.0%


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B.Total Media SpendingTotal US advertising spending will reach $248.25 billion this year,according to eMarketer. That represents a 4.9% gain over last year’s$236.75 billion figure, benchmarked against spending research fromUniversal McCann through 2002. As with Universal’s estimates, eMarketerincludes the following media, both national and local, in its ad spendingprojections: television, radio, newspapers, magazines, Internet, direct mail,yellow pages, and outdoor.

With help from the national elections and the Olympic games, ad spendingin 2004 will rise by 6.1%. However, while eMarketer expects continuedincreases of 5.3% and 5.6% in both 2005 and 2006, respectively, the lift inspending will remain relatively flat as the economy continues to flounder.

US Advertising Spending, 2000-2006 (in billions)

2000 $247.50

2001 $231.30

2002 $236.75

2003 $248.25

2004 $263.50

2005 $277.50

2006 $293.00

Note: eMarketer benchmarks its US ad spending projections againstUniversal McCann, for which the last period measured was 2002Source: eMarketer, June 2003


US Advertising Spending Growth, 2000-2006 (as a %increase/decrease vs. prior year)

2001-6.5%

2002 2.4%

2003 4.9%

2004 6.1%

2005 5.3%

2006 5.6%

Note: eMarketer benchmarks its US ad spending projections againstUniversal McCann, for which the last period measured was 2002Source: eMarketer, June 2003



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“The truth is that traditional media are all asdifferent from each other as the Net is from them.”— Paul DeBraccio, CEO, Interevco; Media, April 2003

Looking just at 2003, comparative estimates for US ad spending growthrange from Global Insight at the high end of 6.0% down to the MyersGroup at 1.5%. Most important, however, is that all 14 researchers predictspending gains this year.


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Comparative Estimates: US Advertising SpendingGrowth, 2003 (as a % increase/decrease vs. prior year)

Global Insight, November 2002

6.0%


5.3%

Veronis Suhler Stevenson, July 2002

5.3%

Standard & Poor's, August 2002

5.1%

eMarketer*, June 2003

4.9%


4.6%

J.P. Morgan H&Q, August 2002

4.5%


4.4%


3.5%

CMR/TNS, March 2003

3.3%

CIBC World Markets, November 2002

3.1%

PricewaterhouseCoopers, May 2002

3.0%

Zenith Optimedia, April 2003

2.2%


1.5%

Note: all firms' figures include TV, radio, magazines, newspapers, outdoorand Internet (except Global Insight and Jupiter, which do not includeoutdoor); in addition, CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter,and Universal McCann include direct mail; eMarketer, Jupiter, MorganStanley, Myers, Universal McCann, and Veronis include yellow pages;Initiative Media and Zenith include cinema; CIBC, eMarketer, Global Insight,J.P. Morgan, Jupiter, and Universal McCann include other or miscellaneouscategories; *eMarketer benchmarks its US ad spending projections againstUniversal McCann, for which the last period measured was 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003



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“Advertising accounts for 30% of all communicationsspending and has a cyclical relationship with theeconomy. So as the economy improves, we expectadvertising and therefore communicationsspending to grow in a parallel path.”— James P. Rutherfurd, executive vice president,Veronis Suhler Stevenson;

The New York Times, 5 August 2002

Expanding the view from this year to the six-year span from 2001 to 2006shows that all researchers with estimates for the next three years projectincreased ad spending. Seven of the eight growth rates listed for 2004, forexample, fall into a relatively narrow two-point range from 5.3% to 7.3%.

Comparative Estimates: US Advertising SpendingGrowth, 2001-2006 (as a % increase/decrease vs. prioryear)

2001 2002 2003 2004 2005 2006

CIBC World Markets, November 2002 -6.9% 0.5% 3.1% – – –

CMR/TNS, March 2003 -1.4% 1.1% 3.3% – – –

Corzen, January 2003 – 4.0% – – – –

eMarketer*, June 2003 -6.5% 2.4% 4.9% 6.1% 5.3% 5.6%

Global Insight, November 2002 -6.8% 3.0% 6.0% 5.7% 5.6% 5.6%

Initiative Media, March 2003 – – 3.5% – – –

J.P. Morgan H&Q, August 2002 -6.4% 1.9% 4.5% 5.3% 5.1% 4.9%

Jupiter Research, October 2002 -3.7% 2.3% 5.3% 6.0% 4.6% 4.3%

Morgan Stanley, November 2002 -10.9% 2.9% 4.4% – – –

Myers Report, May 2003 -4.1% 2.5% 1.5% 5.3% – –

PricewaterhouseCoopers, May 2002 -7.7% 1.1% 3.0% 7.3% 5.3% 6.5%

Standard & Poor's, August 2002 -6.5% 2.7% 5.1% – – –

Universal McCann, June 2003 -6.5% 2.4% 4.6% 6.5% – –

Veronis Suhler Stevenson, July 2002 -6.2% 2.9% 5.3% 7.2% 5.9% 6.3%

Zenith Optimedia, April 2003 -1.9% 1.4% 2.2% 4.5% 3.3% –

Note: all firms' figures include TV, radio, magazines, newspapers, outdoorand Internet (except Global Insight and Jupiter, which do not includeoutdoor); in addition, CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter,and Universal McCann include direct mail; eMarketer, Jupiter, MorganStanley, Myers, Universal McCann, and Veronis include yellow pages;Initiative Media and Zenith include cinema; CIBC, eMarketer, Global Insight,J.P. Morgan, Jupiter, and Universal McCann include other or miscellaneouscategories; Corzen includes directories, alternative newspapers, andtelemarketing; *eMarketer benchmarks its US ad spending projectionsagainst Universal McCann, for which the last period measured was 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003



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Translated to dollars, however, and the ad spending numbers go all over themap. That’s largely because different researchers base their figures ondifferent media components. While all 15 firms charted below include TV,radio, magazines, newspapers, the Internet, and outdoor (except for GlobalInsight and Jupiter, which do not include outdoor), several do not includedirect mail, a $45 billion-plus business. That omission helps partially toexplain the low figures from Taylor Nelson Sofres’s CMR division, MorganStanley, and PricewaterhouseCoopers, to name three.

Comparative Estimates: US Advertising Spending,2001-2006 (in billions)

2001

$219.75

$112.55

$224.08

$231.30

$221.40

–

$234.02

$231.04

$151.20

$156.90

$148.80

$231.00

$231.30

$172.11

$141.64

2002

$220.87

$113.75

$232.97

$236.75

$228.00

$99.15

$238.46

$236.40

$155.57

$160.89

$150.38

$237.20

$236.75

$177.15

$143.55

2003

$227.68

$117.50

–

$248.25

$241.70

$102.57

$249.18

$248.90

$162.44

$163.31

$154.96

$249.20

$247.73

$186.51

$146.67

2004

–

–

–

$263.50

$255.40

–

$262.41

$263.85

–

$171.95

$166.29

–

$263.80

$200.03

$153.34

2005

–

–

–

$277.50

$269.80

–

$275.85

$276.00

–

–

$175.13

–

–

$211.93

$158.32

CIBC World Markets,November 2002

CMR/TNS, March2003

Corzen, January2003

eMarketer*,June 2003

Global Insight,November 2002

Initiative Media,March 2003

J.P. Morgan H&Q,August 2002

Jupiter Research,October 2002

Morgan Stanley,November 2002

Myers Report, May2003

Pricewaterhouse-Coopers, May 2002

Standard & Poor's,August 2002

Universal McCann,June 2003

Veronis SuhlerStevenson, July2002

Zenith Optimedia,April 2003

2006

–

–

–

$293.00

$285.00

–

$289.31

$287.88

–

–

$186.47

–

–

$225.25

–

Note: all firms' figures include TV, radio, magazines, newspapers, outdoorand Internet (except Global Insight and Jupiter, which do not includeoutdoor); in addition, CIBC, eMarketer, Global Insight, J.P. Morgan, Jupiter,and Universal McCann include direct mail; eMarketer, Jupiter, MorganStanley, Myers, Universal McCann, and Veronis include yellow pages;Initiative Media and Zenith include cinema; CIBC, eMarketer, Global Insight,J.P. Morgan, Jupiter, and Universal McCann include other or miscellaneouscategories; Corzen includes directories, alternative newspapers, andtelemarketing; *eMarketer benchmarks its US ad spending projectionsagainst Universal McCann, for which the last period measured was 2002Source: eMarketer, June 2003; various, as noted, 2002 & 2003



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On a quarter-by-quarter basis, the 2003 full year growth rate of 3.3% fromCMR/TNS breaks down to higher increases in the first half of 4.2% and 4.7%,with slackening growth rates of 2.7% and 1.6% during 2003’s second half.

Advertising Spending in the US, 2003 (as a % growthvs. prior year)

First half 2003 4.5%

Q1 2003 4.2%

Q2 2003 4.7%

Second half 2003 2.1%

Q3 2003 2.7%

Q4 2003 1.6%

Full year 2003 3.3%

Source: CMR/TNS Media Intelligence, January 2003



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C.The Offline Ad MarketAnother way to segment the ad market is national and local. In recent datafrom Universal McCann, the 2003 outlook for national advertising is$153.06 billion, or 62% of the market, while it’s $94.66 billion for local, ora 38% share.

And according to CMR/TNS—which does not include direct mail, forexample—while more money was spent for national advertising in 2002($75.3 billion), local advertising grew more quickly (by 11.1%) over theprior year.

US Local and National Advertising Spending, 2001 &2002 (in billions)

National advertising

Local advertising

January -December

2001

$74.7

$37.8

January -December

2002

$75.3

$42.0

% change

0.7%

11.1%

Source: CMR/TNS Media Intelligence, March 2003



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By MediaWhich media get the most ad dollars? The “Outlook for Advertising andMedia” report from Global Insight points to nearly no shifts in media sharefrom 2001 to 2006. For instance, ad spending in newspapers will drop froma 23% share to 22%; direct mail will remain stable at 19%; and the Internet,like cable TV, will increase by one share point.

US Advertising Spending Share, by Media, 2001 & 2006

Newspapers

23%

22%

Broadcast TV

21%

20%

Direct mail

19%

19%

Radio

8%

8%

Cable TV

6%

7%

Magazines

5%

5%

Internet

2%

3%

Other

16%

16%

2001 2006

Source: Global Insight, November 2002



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Turning from media share to spending growth rates, CMR/TNS expectsSpanish language TV, the Internet, and cable network TV to gain the largestincreases in 2003—all surpassing the company’s average 3.3% growth rate.

Advertising Spending in the US, by Media, 2003 (as a% growth vs. prior year)

Spanish language TV (1)

9.2%

Internet (2)

7.4%

Cable network TV

4.8%

Radio (Local, network and national spot) (3)

3.8%

B2B magazine (4)

3.6%

Outdoor

3.4%

Consumer/Sunday magazines

2.7%

Network TV

2.7%

Newspapers (national and local)

2.6%

Syndication

2.5%

Spot TV

1.9%

Note: (1) includes expenditures from Univision and Telemundo; (2) figuresprovided by Evaliant, a CMR/TNS Company; (3) Local radio includesexpenditures for 30 markets in the US; (4) figures based on BusinessInformation Network (BIN) data as reported by CMR/TNS Media Intelligenceto the American Business Media (ABM)Source: CMR/TNS Media Intelligence, January 2003


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The most recent figures from CMR/TNS, for Q1 2003, show a total growthrate of 4.9%. Several media are doing substantially better than thataverage, however. Ad spending on cable TV jumped by 18.0%, reachingmore than $2.5 billion in the first quarter. Consumer magazines are alsoparticipating in an ad recovery, increasing by 12.0% to more than $3.7billion. And Internet advertising posted a 12.2% gain, with spending atmore than $1.5 billion.

CMR/TNS competitor Nielsen Media Research is another companymeasuring the whole ad space. In Nielsen’s analysis of Q1 2003 adspending, it too sees Hispanic TV and national magazines with largeincreases of 15.1% and 14.4%, respectively. However, Nielsen did notreport figures for online ad spending.

US Advertising Spending, by Media, Q1 2002 vs. Q12003 (in millions and as a % increase/decrease vs.prior year)

Q1 2002 Q1 2003 % change

Network TV $5,369.0 $5,050.0 5.9%

Spot TV $3,716.1 $3,736.8 0.6%

Cable TV (1) $2,123.9 $2,506.3 18.0%

Syndication-national $709.2 $812.1 14.5%

Spanish language network TV (2) $426.5 $509.7 19.5%

Local radio (3) $1,334.7 $1,397.7 4.7%

National spot radio $474.2 $526.9 11.1%

Network radio $208.1 $227.0 9.1%

Total broadcast $14,361.6 $14,766.6 2.8%

Consumer magazines $3,307.6 $3,705.8 12.0%

B2B magazines $1,898.9 $2,003.6 5.5%

Sunday magazines $303.3 $328.9 8.4%

Local magazines $69.8 $77.1 10.4%

Local newspapers $4,639.1 $4,843.4 4.4%

National newspapers $680.5 $675.9 -0.7%

Total print $10,899.2 $11,634.7 6.7%

Internet $1,355.0 $1,520.2 12.2%

Outdoor $550.6 $562.4 2.2%

Grand total $27,166.3 $28,483.9 4.9%

Note: (1) based on 37 networks; (2) includes Univision, Telemundo andTelefutura; (3) based on spending in 32 marketsSource: TNS Media Intelligence/CMR, June 2003




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Furthermore, the New York-based research firm put total ad spendinggrowth at only 1.5% for the first quarter, compared to the CMR/TNS figureof 4.9%. One possible reason for the difference is that Nielsen is measuringa smaller set of media than CMR/TNS.

US Advertising Spending Growth, by Media, Q1 2003(as a % increase/decrease vs. Q1 2002)

Hispanic TV 15.1%

National magazines 14.4%

Local newspapers 8.9%

Spot radio 3.9%

Total 1.5%

Spot TV 1.4%

Network radio 0.3%

Syndicated TV-4.8%

National newspapers-5.0%

Cable TV-5.1%

Network TV-5.2%

Note: spot radio monitored in 19 markets; newspaper reflects display adsonlySource: Nielsen Media Research, May 2003



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Looking back to last year, CMR/TNS said that Spanish language TV was thegrowth leader for ad spending, increasing by 20.4% to $1.95 billion. Andby dollars alone, advertisers spent $20.09 billion on local newspapers, justslightly more than they spent on network TV, at $20.02 billion.

US Advertising Spending, by Media, 2001 & 2002 (inbillions and as a % increase/decrease vs. prior year)

2001 2002 % change

Network TV $18.64 $20.02 7.4%

Spot TV $14.35 $16.36 14.0%

Cable $10.30 $10.59 2.9%

Syndication-national $3.19 $2.95 -7.7%

Spanish language network TV $1.62 $1.95 20.4%

Local radio $5.06 $5.60 10.5%

National spot radio $2.17 $2.45 13.2%

Network radio $0.83 $.97 15.7%

Total broadcast $56.15 $60.87 8.4%

Consumer magazines $16.50 $16.79 1.8%

B2B magazines $8.40 $7.22 -13.9%

Sunday magazines $1.14 $1.26 10.6%

Local newspapers $18.43 $20.09 9.0%

National newspapers $2.95 $2.81 -4.6%

Total for print $47.42 $48.19 1.6%

Internet $6.52 $5.74 -11.9%

Outdoor $2.46 $2.48 0.8%

Grand total $112.55 $117.27 4.2%

Source: TNS Media Intelligence/CMR, March 2003



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By Industry & AdvertiserViewed by product category, automobile manufacturers spent the most onadvertising during the first two months of 2003, at $1.31 billion, accordingto Nielsen. However, that was a 1.21% decrease from the same period in2002. Interestingly, the two product categories showing the largest growthrates are part of the same industry: auto dealers associations, with a 71.66%gain, and local auto dealers, with a 13.45% spending increase.

Top 10 Computers & Consumer Electronics Web Sitesamong At-Home Internet Users in the US, WeekEnding 4 May 2003 (unique audience in thousands and% active reach)

Uniqueaudience

Activereach

Time perperson

(hrs:min:sec)

Windows Media Player 11,783 14.55% 0:19:02

WhenU 8,107 10.01% 0:04:25

Real 7,775 9.60% 0:13:00

KaZaA 6,725 8.31% 0:50:36

Microsoft Windows Update 5,702 7.04% 0:04:13

Gator Network 3,934 4.86% 0:01:32

Apple 3,704 4.57% 0:03:18

McAfee 3,430 4.24% 0:06:19

AOL Computer & Electronics 2,468 3.05% 0:02:14

CNET 2,417 2.99% 0:03:07

Note: NetView traffic figures now incorporate AOL Proprietary Channelsand Internet Applications Tracking with regular Web traffic data. This datacannot be trended against data from previous weeksSource: Nielsen//NetRatings, March 2003



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Those early 2003 results appear to be simply a continuation of 2002’sspending patterns. According to CMR/TNS, both domestic and import carand truck manufacturers and dealers increased ad spending by 15.4% and17.0%, respectively.

Top 10 US Industries by Advertising Spending, 2001 &2002 (in billions and as a % change year-over-year)

Domestic car and truck factorydealer

Non-domestic car and truck factoryand dealer

Telecommunications services

Transportation and tourism

Media and marketing services

Banking and investment

Restaurants

Food

Motion pictures

Health aids

Total

January-December

2001

$6.28

$6.13

$3.79

$4.12

$3.92

$4.21

$3.46

$3.40

$2.99

$2.38

$40.66

January-December

2002

$7.25

$7.17

$4.48

$4.23

$4.19

$4.07

$3.84

$3.57

$3.41

$2.89

$45.11

% Change

15.4%

17.0%

18.2%

2.7%

7.0%

-3.3%

11.1%

5.2%

14.2%

21.7%

10.9%

Source: CMR/TNS Media Intelligence, December 2002



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In January and February 2003, the top three advertisers in the US, bydollars spent, were Procter & Gamble, General Motors, and Walt Disney,according to Nielsen.

By spending increases relative to the same period last year, the top threewere Ford (at 55.34%), Sony (at 47.15%), and Disney (at 24.24%). Theaverage growth rate for the month was 6.84%, another indicator of apossible spending jump this year.

Top 10 Advertisers in the US, January-February 2003(in millions and as a % increase/decrease vs.January-February 2002)

Procter & Gamble Company

$373.9 (18.70%)

General Motors Corporation

$334.4 (-24.63%)

Walt Disney Company

$269.1 (24.24%)

AOL Time Warner

$249.0 (4.71%)

Ford Motor Company

$205.2 (55.34%)

Johnson & Johnson

$197.8 (12.71%)

DaimlerChrysler AG

$188.5 (-6.45%)

Altria Group Inc.

$165.6 (2.67%)

Toyota Motor Corporation

$156.8 (1.32%)

Sony Corporation

$152.3 (47.15%)

Total

$2,292.6 (6.84%)

Note: includes network TV, spot TV, syndicate TV, Hispanic TV, national/localmagazine, network/spot radio (19 markets), outdoor, FSI (CPGs only),national/local newspapers (display ads only), national/local sundaysupplementsSource: Nielsen Media Research, May 2003



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Like Nielsen, the research from CMR/TNS also ranks P&G, General Motors,AOL Time Warner, and Disney as the top four ad spenders in the Q1 2003 period.

However, CMR/TNS says AOL Time Warner decreased spending by 4.0%,while Nielsen points to a 4.71% increase. Possibly March 2003 spending, notaccounted for in the Nielsen data, is the primary reason for the difference.

Two more acute growth rate disparities are found in DaimlerChrysler’sand Johnson & Johnson’s spending. The car manufacturer’s figures weredown by 6.45% according to Nielsen, and up by 19.0% according toCMR/TNS. The health-care company’s figures were up by 12.71% or 34.8%,depending on whether the data is from Nielsen or CMR/TNS.

Spending in offline media by Internet-centric companies is part of thetrend towards cross-media advertising, according to data published in anAdvertising Age article. Companies such as Charles Schwab, Ameritrade,and eBay all increased their offline media spending in 2002. For, just astraditional companies realize increasingly that online advertising needs tobe part of their media plans, the same appears to be true in reverse for thosecompanies with mainly online presences.

Top 10 US Advertisers Ranked by Ad Spending, Q12002 vs. Q1 2003 (in millions and as a %increase/decrease vs. prior year)

Q1 2002 Q1 2003 % change

Procter & Gamble $495.7 $608.1 22.7%

General Motors $618.3 $575.3 -7.0%

AOL Time Warner $479.5 $460.4 -4.0%

Walt Disney Co. $320.4 $396.4 23.7%

DaimlerChrysler $296.6 $352.9 19.0%

Ford Motor Co. $255.2 $323.6 26.8%

Johnson & Johnson $222.4 $299.8 34.8%

Sony $185.3 $261.9 41.3%

Verizon $255.8 $260.8 2.0%

Altria Group $259.4 $242.4 -6.5%

Source: TNS Media Intelligence/CMR, June 2003



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Publicly Traded US Internet-Centric Companies AdSpending in Traditional Media, 1999-2002 (in millions)

1999 2000 2001 2002

Charles Schwab Corp. $190.8 $238.3 $138.3 $160.5

Ameritrade $105.9 $164.5 $57.7 $64.7

eBay $4.9 $19.4 $15.0 $52.6

EarthLink $21.9 $48.8 $54.0 $52.0

Yahoo! $36.4 $69.8 $52.9 $41.0

United Online $13.2 $76.1 $23.9 $34.3

LendingTree $9.4 $35.4 $26.3 $32.5

Priceline.com $29.3 $92.7 $39.1 $22.4

Amazon.com $36.9 $19.4 $10.3 $19.2

MarketWatch.com $3.7 $7.1 $6.6 $8.5

iVillage $33.8 $13.1 $6.6 $4.6

Quotesmith.com $17.2 $28.6 $10.6 $4.1

CNet Networks $40.2 $15.2 $6.7 $2.8

Barnes & Noble.com $11.2 $6.3 $0.4 $1.6

Audible $2.2 $2.1 $3.5 $1.5

Overture Services $5.1 $4.3 $0.0 $0.4

WorldGate Communications $1.0 $1.2 $0.7 $0.3

Knot $0.1 $0.2 $0.1 $0.1

Stamps.com $11.6 $5.3 $0.3 $0.0

Autobytel $11.3 $19.9 $6.4 $0.0

Drugstore.com $8.4 $11.6 $0.0 $0.0

InsWeb $6.5 $3.4 $0.0 $0.0

Bluefly $5.7 $8.4 $2.8 $0.0

Bankrate $5.2 $0.3 $0.0 $0.0

LookSmart $4.8 $0.0 $0.0 $0.0

US Search.com $4.3 $2.3 $0.0 $0.0

TheStreet.com $4.1 $4.2 $0.0 $0.0

Multex.com $3.5 $0.4 $0.0 $0.0

IGN Entertainment $1.8 $4.0 $0.0 $0.0

SportsLine.com $1.6 $26.8 $2.2 $0.0

Switchboard $1.6 $6.3 $15.2 $0.0

Alloy $1.4 $0.0 $0.0 $0.0

Homestore $0.3 $25.7 $1.3 $0.0

Edgar Online $0.0 $0.5 $0.0 $0.0

SoundView Technology Group $0.0 $1.5 $0.0 $0.0

Total $635.3 $963.1 $480.9 $503.1

Average $18.2 $27.5 $13.7 $14.4

Note: ranked by 2002 spendingSource: Pegasus Research International, Advertising Age, Taylor NelsonSofres' CMR, US Securities and Exchange Commission, Bloomberg, April2003



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Promotion SpendingLooking at promotion spending by companies, the largest share ofspending goes into premiums, according to the Promotion MarketingAssociation (PMA). At $44.1 billion in 2002, spending on premiums faroutweighs the $15.5 billion spent on point-of-purchase displays.

The promotion industry segments with the highest growth rates in 2002were agency net revenues (at 14.8%), fulfillment (at 13.5%), and interactivemarketing (at 13.1%).

Promotion Spending in the US, by Industry Segment,2001 & 2002 (in millions and as a % change)

2001 2002 % change

Premiums/promotions $42,265 $44,100 4.3%

P-O-P displays $15,500 $15,500 0.0%

Sponsorships $9,300 $9,393 1.0%

Coupons $6,500 $6,800 4.5%

Specialty printing $5,900 $5,770 -2.2%

Licensing $5,800 $6,000 3.0%

Fulfillment $3,230 $3,666 13.5%

Agency net revenues $2,845 $3,266 14.8%

Interactive marketing (Internet) $1,500 $1,700 13.1%

Games, contests, sweeps $1,650 $1,800 9.0%

Research $1,475 $1,497 1.5%

Product sampling $1,230 $1,340 9.0%

In-store services $850 $867 2.0%

Subtotal Year-to-year $98,045 $101,699 3.7%

Event marketing $115,000 $132,000 3.7%

Revised total $213,045 $233,699 9.7%

Source: Promo Magazine/Promotion Marketing Association, April 2003



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Hispanic Market SpendingAs shown in the Nielsen and CMR/TNS data above, Spanish language TV isa clear growth leader among advertising media.

Research from the Myers Group shows that about 70% of the ad moneyused to target Hispanics goes into broadcast network TV and spot TV nearlyequally. Radio is the third-most used medium to target this growing audience.

Myers says that by 2004, over $3.7 billion will be spent on Hispanic marketadvertising, up from $3.4 billion this year.

Hispanic Market Advertising Spending in the US, byMedia, 2001-2004 (as a % of market share)

2001 2002 2003 2004

Broadcast networks 32.3% 34.0% 34.9% 36.1%

Local and national spot TV 31.3% 32.8% 33.7% 33.9%

Radio 21.6% 19.3% 18.0% 17.1%

Newspapers 8.0% 7.4% 7.1% 6.9%

Outdoor 2.5% 2.2% 2.0% 1.9%

Magazines 2.2% 2.0% 1.9% 1.8%

Network cable television 1.6% 1.5% 1.6% 1.8%

Online 0.6% 0.8% 0.9% 0.6%

Source: Myers Group, March 2003


Hispanic Market Advertising Spending in the US, byMedia, 2001-2004 (in millions)

2001 2002 2003 2004

Broadcast networks $856 $1,038 $1,185 $1,339

Local and national spot TV $830 $1,002 $1,142 $1,260

Radio $573 $589 $612 $636

Newspapers $212 $226 $241 $255

Outdoor $65 $66 $67 $69

Magazines $58 $61 $63 $65

Network cable television $42 $46 $53 $65

Online $16 $25 $30 $24

Total $2,652 $3,053 $3,393 $3,713

Source: Myers Group, March 2003



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While research from Hispanic Business offers different proportions, itagrees with Myers that network and local TV are the ways that mostadvertisers are targeting the Spanish-speaking audience.

Advertising Spending in the US Hispanic Market, byMedia, 2002 (in millions)

Network/national TV $1,014.0

Local TV $507.4

Local radio $419.0

National radio $170.1

Local newspapers $135.7

National newspapers $90.5

Out-of-home $65.6

Magazines $61.3

Note: Total=$2,463.4 million; numbers may not add up to total due toroundingSource: Hispanic Business, December 2002



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D. Broadcast SpendingTogether, broadcast and cable TV, both national and local, get the lion’sshare of US advertising spending. In 2003, that spending will be anywherefrom Initiative Media’s $52.86 billion to Veronis Suhler’s $61.07 billion,with five estimates in between.

All seven researchers with projections for 2003 expect TV ad spending toincrease. Comparative growth rates in 2003 start at 2.8%(PricewaterhouseCoopers), hover in the 3.9% to 5.0% range (Initiative Media,J.P. Morgan, and Universal McCann), and top out at 6.7% (Jupiter Research).

“Ad spending has declined from 42% to 12% ofmarketing spending in the last 20 years, and themarketing pie continues to fragment. It takes moreto do less. In 1965 it took three commercials toreach 97% of women; today it takes 97.”— Norman Lehoullier, managing director, Grey Interactive Worldwide; from

the Advertising Research Foundation, 3 December 2002

Comparative Estimates: US Television AdvertisingSpending, 2000-2006 (in billions)

CMR/TNS, March2003

Corzen, January2003

Initiative Media,March 2003



Myers Report,October & December2002, May 2003



Veronis Suhler, July2002

2000

–

–

–

$61.06

–

$56.64

$56.65

$60.26

$56.08

2001

$48.09

$52.63

–

$55.13

$54.42

$52.16

$53.58

$54.40

$53.88

2002

$51.86

$55.49

$50.89

$57.86

$56.25

$55.69

$56.37

$53.72

$57.68

2003

–

–

$52.86

$60.10

$60.00

$58.87

$57.96

$56.40

$61.07

2004

–

–

–

–

$64.58

$64.15

$63.86

–

$66.67

2005

–

–

–

–

$66.66

–

$66.06

–

$70.05

2006

–

–

–

–

$68.75

–

$71.03

–

$75.72

Note: includes both broadcast and cableSource: various, as noted, 2002 & 2003



113


Methodology




Cross-Media Trends


Index of Charts

The four firms with estimates for 2004 expect significant growth in the 7.6%to 10.2% range. Interestingly, while for 2003 PwC and Jupiter offered growthrates at the low and high end, respectively, for 2004 they switch places.

“The days of spending hundreds of millions ofdollars on TV advertising are over. Reachingconsumers is no longer TV driven.”— Bill Lamar Jr., senior vice president US marketing, McDonald’s;


Comparative Estimates: US Television AdvertisingSpending Growth, 2001-2006 (as a % increase/decrease vs. prior year)


CMR/TNS, March 2003

Corzen, January 2003



Myers Report, October &December 2002, May 2003




2001

–

–

–

-9.7%

–

-7.9%

-5.4%

-9.7%

-3.9%

2002

7.8%

5.4%

–

4.9%

3.4%

6.8%

5.2%

-1.2%

7.1%

2003

–

–

3.9%

3.9%

6.7%

5.7%

2.8%

5.0%

5.9%

2004

–

–

–

–

7.6%

9.0%

10.2%

–

9.2%

2005

–

–

–

–

3.2%

–

3.4%

–

5.1%

2006

–

–

–

–

3.1%

–

7.5%

–

8.1%

Note: includes both broadcast and cableSource: various, as noted, 2002 & 2003



114


Methodology




Cross-Media Trends


Index of Charts

Among those media planners looking to spend more on TV advertising thisyear, the key influence is reach, according to 42% of the respondents to asurvey sponsored by MediaPost. Covering their target audience is anotherimportant factor, cited by 29% of the respondents.

The six comparative estimates for radio ad spending in 2003, both nationaland local, lie in a fairly narrow span, with about $1 billion separatingPwC’s low projection of $19.27 billion from J.P. Morgan’s high projectionof $20.29 billion.

“In hard times, often ad budgets becomediscretionary, but you can only do that for so long.In order to maintain your market share, you have to advertise.”— Diane Warren, spokesperson, Clear Channel; Reuters, 30 October 2002

Factors that Influence US Media Planners Who ArePlanning to Spend More on TV in 2003 (as a % ofrespondents)

Reach 42%

Coverage of target 29%

Client preference 23%

Brand image 22%

Demographics 21%

Composition of target 14%

CPM 14%

Agency preference 8%

Buzz 6%

Note: n=243Source: MediaPost, InsightExpress, February 2003



115


Methodology




Cross-Media Trends


Index of Charts

In next year’s spending market, healthy increases will bring the dollarfigure up to as high as $21.17 billion, which is Jupiter’s estimate.

Starting in 2002, every researcher for every year shown calculatesincreases in radio ad spending. This oldest of broadcast media offers asteady market, with projected annual increases over the next three years no lower than 4.0% (Myers in 2004) and as high as 8.1% (Veronis in 2006).

Comparative Estimates: US Radio AdvertisingSpending, 2000-2006 (in billions)

CMR/TNS, March2003

Corzen, January2003






Veronis Suhler,July 2002

2000

–

–

$19.82

–

$19.09

$19.30

$19.30

$19.07

2001

$8.06

$9.01

$18.36

$17.86

$18.40

$18.05

$17.90

$17.89

2002

$9.01

$18.48

$19.19

$18.58

$19.23

$18.44

$18.94

$18.46

2003

–

–

$20.29

$19.75

$19.61

$19.27

$19.64

$19.41

2004

–

–

–

$21.17

$20.40

$20.39

–

$20.88

–

–

–

–

–

2005

$22.44

$21.49

$22.34

2006

–

–

–

$23.56

–

$22.61

–

$24.14

Note: includes both national and localSource: various, as noted, 2002 & 2003


Comparative Estimates: US Radio AdvertisingSpending Growth, 2001-2006 (as a % increase/decrease vs. prior year)

CMR/TNS, March 2003








2001

–

–

-7.4%

–

-3.6%

-6.5%

-7.2%

-6.2%

2002

11.7%

8.2%

4.5%

4.0%

4.5%

2.1%

5.8%

3.2%

2003

–

–

5.7%

6.3%

2.0%

4.5%

3.7%

5.2%

2004

–

–

–

7.2%

4.0%

5.8%

–

7.5%

2005

–

–

–

6.0%

–

5.4%

–

7.0%

2006

–

–

–

5.0%

–

5.2%

–

8.1%




116


Methodology




Cross-Media Trends


Index of Charts

E. Print SpendingNewspapers, both local and national, are the largest ad medium this side oftelevision. After some downturns in 2002, the six research firms withestimates for 2003 cite spending figures in a fairly narrow range. Five outof six estimates are between $44 billion and $47 billion.

The outlier is Veronis Suhler. Starting at a larger base, Veronis seesnewspaper advertising increasing to nearly $67 billion by 2006. Incontrast, Jupiter and PwC project $52.16 billion and $53.25 billion,respectively, for the same year.

Comparative Estimates: US Newspaper AdvertisingSpending, 2000-2006 (in billions)

CMR/TNS, March 2003




Myers Report, October& December 2002May 2003




2000

–

–

$48.67

–

$48.40

$48.67

$49.05

$54.96

2001

$21.38

$50.31

$44.32

$44.26

$44.30

$44.32

$44.30

$50.73

2002

$22.90

$50.02

$44.59

$44.76

$43.86

$43.85

$44.45

$52.35

2003

–

–

$46.55

$46.55

$44.30

$45.20

$45.71

$55.70

2004

–

–

–

$48.51

$45.18

$47.95

–

$59.48

2005

–

–

–

$50.35

–

$50.90

–

$63.81

2006

–

–

–

$52.16

–

$53.25

–

$66.89




117


Methodology




Cross-Media Trends


Index of Charts

Several researchers—such as J.P. Morgan, Jupiter, and PwC—believe thatafter spending decreases or flat growth last year, newspaper ad spendingwill rise by about 4% this year. And all the projections for 2004 and beyondsee increased spending on either a moderate (2% to 4%) or healthy (6% orhigher) scale.

Comparative estimates for the magazine category are mixed. One reasonfor wide divergence of spending figures is that some companies includeboth consumer and business magazines, while others look at just theconsumer segment. Or take Universal McCann’s figure of $11.77 billion—substantially lower than most others because it includes only nationalmagazine ad spending, but not local.

Comparative Estimates: US Newspaper AdvertisingSpending Growth, 2001-2006 (as a % increase/decreasevs. prior year)

CMR/TNS, March 2003




Myers Report, October & December2002, May 2003




2001

–

–

-8.9%

–

-8.5%

-8.9%

-9.7%

-7.7%

2002

7.1%

-0.6%

0.6%

1.1%

-1.0%

-1.1%

0.3%

3.2%

2003

–

–

4.4%

4.0%

1.0%

3.1%

2.8%

6.4%

2004

–

–

–

4.2%

2.0%

6.1%

–

6.8%

2005

–

–

–

3.8%

–

6.2%

–

7.3%

2006

–

–

–

3.6%

–

4.6%

–

4.8%




118


Methodology




Cross-Media Trends


Index of Charts

In 2003, for example, PwC and Veronis, which include all magazine types,estimate ad spending at $18.84 billion and $21.93 billion, respectively. Onthe other hand, Jupiter’s estimate of $11.64 billion covers consumermagazines only.

Projected growth rates, however, follow a closer path. In 2003, other thanPwC’s outlier, the other five researchers estimate spending increases from3.9% (Veronis) to 6.0% (Jupiter). These are welcome predictions, after2002’s spending falls, as indicated by seven of the eight firms with figuresfor that year.

Comparative Estimates: US Magazine AdvertisingSpending, 2000-2006 (in billions)

CMR/TNS, March 2003*

Corzen, January 2003*



Myers Report, October& December 2002,May 2003

Pricewaterhouse-Coopers, May 2002*


Veronis Suhler,July 2002*

2000

–

–

$17.29

–

$17.05

$23.26

$17.29

$26.18

2001

$26.04

$23.00

$15.56

$11.10

$16.21

$19.41

$15.60

$22.73

2002

$25.29

$22.06

$15.43

$10.98

$16.46

$18.77

$10.99

$21.11

2003

–

–

$16.14

$11.64

$17.11

$18.84

$11.77

$21.93

2004

–

–

–

$12.34

$17.89

$19.39

–

$23.38

2005

–

–

–

$12.96

–

$20.79

–

$24.82

2006

–

–

–

$13.48

–

$22.33

–

$26.24

Note: *includes both consumer and B2B magazinesSource: various, as noted, 2002 & 2003



119


Methodology




Cross-Media Trends


Index of Charts

Beyond 2003, the four companies making predictions all see steady growth,with PwC’s 7%-plus in 2005 and 2006 the most optimistic.

According to the Publishers Information Bureau, a New York-based tradegroup, the two industry categories with the largest ad spends are also theones with the greatest growth. That is, in February 2003, drugs and remedycompanies spent $137.7 million on magazine advertising, a 32.8% increasefrom the previous year. And companies in the auto industry spent $137.3million, a 49.4% increase.

Comparative Estimates: US Magazine AdvertisingSpending Growth, 2001-2006 (as a % increase/decrease vs. prior year)

CMR/TNS, March 2003*

Corzen, January 2003*




PricewaterhouseCoopers,May 2002*


Veronis Suhler, July 2002*

2001

–

–

-10.0%

–

-4.9%

-16.6%

-9.7%

-13.2%

2002

-2.9%

-4.1%

-0.9%

-1.0%

1.5%

-3.3%

-29.6%

-7.1%

2003

–

–

4.6%

6.0%

4.0%

0.3%

7.1%

3.9%

2004

–

–

–

6.0%

4.5%

2.9%

–

6.6%

2005

–

–

–

5.0%

–

7.2%

–

6.2%

2006

–

–

–

4.0%

–

7.4%

–

5.7%

Note: *includes both consumer and B2B magazinesSource: various, as noted, 2002 & 2003



120


Methodology




Cross-Media Trends


Index of Charts

Other industries ramping up their magazine ad spending include retailers(at 23.6% growth); transportation, hotels, and resorts (at 18.3%); homefurnishing and supplies (at 14.9%); and toiletries and cosmetics (at 14.8%).

On the other side, the hurting technology sphere decreased spending by 16.4%.

US Magazine Advertising Spending, by IndustryCategory, February 2002 & February 2003

Drugs and remedies

Automotive

Food and food products

Direct response companies


Home furnishing and supplies

Media and advertising

Apparel and accessories

Technology

Financial, insurance and real estate

Retail

Public transportation, hotels andresorts

February2002

$104,096,267

$91,888,450

$124,687,098

$103,417,526

$94,157,423

$76,715,939

$71,242,320

$76,718,361

$79,083,148

$57,668,337

$42,870,038

$37,846,671

February2003

$137,704,204

$137,253,289

$122,955,592

$109,466,705

$108,060,128

$88,145,386

$78,360,190

$69,332,913

$66,090,301

$54,151,476

$53,007,751

$44,782,807

%change

32.8%

49.4%

-1.4%

5.8%

14.8%

14.9%

10.0%

-9.6%

-16.4%

-6.1%

23.6%

18.3%

Source: Publishers Information Bureau, March 2003



121


Methodology




Cross-Media Trends


Index of Charts

F. Other Offline SpendingUnsung in some ad industry quarters, and derided as “junk mail” by manyconsumers, the direct mail advertising segment regularly shows steady andstrong spending growth. The 2002 and 2003 comparative estimates all top$45 billion, about the same as newspaper ad spending. And the only firmwilling to project beyond this year, Jupiter Research, expects direct mailspending to pass $50 billion in 2005.

Not only has direct mail not gone away with the advent of e-mailmarketing, the two often complement each other. More direct marketers findthat paper works best for less frequent, larger contacts with customers, whilee-mail fits in for the keep-in-touch retention tactics prized by such companies.

The all-positive growth rates from each firm and for all six years in thechart below point to direct mail’s fundamental place in the ad world—astaple in any marketing plan.

Comparative Estimates: US Direct Mail AdvertisingSpending, 2000-2006 (in billions)


Direct MarketingAssociation, July2002




2000

–

$44.52

$44.52

–

$44.59

2001

$43.42

$46.51

$44.65

$44.73

$44.70

2002

$45.77

$49.09

$45.10

$45.87

$45.86

2003

–

–

$46.90

$47.80

$49.06

2004

–

–

–

$49.61

–

2005

–

–

–

$51.40

–

2006

–

–

–

$53.15

–

Source: various, as noted, 2002 & 2003


Comparative Estimates: US Direct Mail AdvertisingSpending Growth, 2001-2006 (as a % increase vs. prioryear)


Direct Marketing Association,July 2002




2001

–

4.5%

0.3%

–

0.2%

2002

5.4%

5.5%

1.0%

2.6%

2.6%

2003

–

–

4.0%

4.2%

7.0%

2004

–

–

–

3.8%

–

2005

–

–

–

3.6%

–

2006

–

–

–

3.4%

–




122


Methodology




Cross-Media Trends


Index of Charts

Yellow page advertising is another steady staple among media, with mid-teen spending figures that rival magazines and hit levels near radiospending. In what’s still a very mobile nation, with people moving fromplace to place and needing to know the local supplier of various productsand services, it’s no surprise that this type of advertising continues to thrive.

According to both Jupiter and Veronis, spending on yellow pagesadvertising will near or top $16 billion by 2005.

Again like direct mail, each firm estimates positive growth rates for all sixyears charted. Jupiter appears the most optimistic of the group, projectingincreases of 5.0% this year and over 4% in the years to follow.

Comparative Estimates: US Yellow Pages AdvertisingSpending, 2000-2006 (in billions)





Yellow Pages Publishers Associ-ation, February 2002

2000

–

$13.20

$13.23

$13.70

$13.20

2001

$13.59

$13.57

$13.60

$14.43

$13.60

2002

$13.86

$13.98

$13.72

$14.67

$14.10

2003

$14.56

$14.12

$13.98

$15.11

–

2004

$15.26

$14.12

–

$15.64

–

2005

$15.96

–

–

$16.27

–

2006

$16.66

–

$16.95

–



–

Comparative Estimates: US Yellow Pages AdvertisingSpending Growth, 2001-2006 (as a % increase vs. prioryear)





Yellow Pages PublishersAssociation, February 2002

2001

–

2.8%

2.8%

5.3%

3.0%

2002

2.0%

3.0%

0.9%

1.7%

3.7%

2003

5.0%

1.0%

1.9%

3.0%

–

2004

4.8%

0.0%

–

3.5%

–

2005

4.6%

–

–

4.1%

–

2006

4.4%

–

–

4.2%

–




123


Methodology




Cross-Media Trends


Index of Charts

As an encompassing media category, outdoor advertising includes both thelarge (billboards mainly) and the small (ads in restaurant bathrooms, forinstance, or on matchbook covers). Other than the low outlier fromInitiative Media for 2003 spending, which typically offers lower estimatesthan other firms, the other four firms converge with projections from $5.24billion (Myers) to $5.70 billion (PwC).

While PwC’s estimate is in close range this year, its projections for thenext three years bring outdoor ad spending at over $7 billion by 2006.

Matching that high dollar prediction, PwC also sees high growth rates of6.5% (in 2003) up to 8.3% (in 2006). Other forecasts, such as from Myersand Veronis, are in the moderate 2% to 3% range.

Comparative Estimates: US Outdoor AdvertisingSpending, 2000-2006 (in billions)

CMR/TNS, March 2003





PricewaterhouseCoopers,May 2002*

Universal McCann, December2002*


2000

–

–

–

$5.24

$5.10

$5.18

$5.18

$5.24

2001

$2.46

$4.28

–

$5.20

$5.14

$5.11

$5.10

$5.19

2002

$2.48

$4.44

$2.18

$5.25

$5.19

$5.35

–

$5.32

2003

–

–

$2.23

$5.46

$5.24

$5.70

–

$5.44

2004

–

–

–

–

$5.34

$6.10

–

$5.59

2005

–

–

–

–

–

$6.60

–

$5.77

2006

–

–

–

–

–

$7.15

–

$5.99

Note: *out-of-home advertisingSource: various, as noted, 2002 & 2003


Comparative Estimates: US Outdoor AdvertisingSpending Growth, 2001-2006 (as a % increase/decrease vs. prior year)

CMR/TNS, March 2003




Myers Report, October & December2002, May 2003

PricewaterhouseCoopers, May 2002*

Universal McCann, June 2003*


2001

–

–

–

-0.7%

0.8%

-1.2%

-1.5%

-0.8%

2002

0.8%

3.6%

–

1.0%

1.0%

4.6%

–

2.5%

2003

–

–

2.2%

4.0%

1.0%

6.5%

–

2.2%

2004

–

–

–

–

2.0%

7.0%

–

2.7%

2005

–

–

–

–

–

8.2%

–

3.2%

2006

–

–

–

–

–

8.3%

–

3.7%

Note: *out-of-home advertisingSource: various, as noted, 2001-2003


IVMethodology 7





A. Attitudes Toward Cross-Media Advertising 126

B. Media Measurement: Apples to Apples? 133

C. Cross-Media Optimization 147

D. Four More Cross-Media Scenarios 157

E. Cross-Media: Driving Traffic Online 168

F. Consumer Media Consumption 172


Index of Charts 237


125



126


Methodology




Cross-Media Trends


Index of Charts

In certain lights, viewing online advertising as an endeavor separate fromother forms of advertising is simply shortsighted. As more companies jointhe trend to cross-media campaigns, the questions about where to advertiseswitch from either/or to which/when.

A.Attitudes Toward Cross-MediaAdvertisingIn order to attain cross-media nirvana, then—at least from the onlineindustry’s point of view—media planners need first to be convinced aboutthe Internet’s basic advertising value. Results from research done byInsightExpress for MediaPost earlier this year have 70% of respondentssaying that online is a valuable advertising medium. That comparesfavorably to segments of media planners who feel the same about TV,magazines, and radio.

Note, though, that as an online research service, InsightExpress drawsrespondents from the Internet only, which could skew the results. Even so,the Internet’s value among US media planners is clearly growing. That’spartially due to two key factors: one, the use of measurement toolsstandard in the offline world; and two, the combined use of branding anddirect response objectives in online campaigns.

“There really isn’t a way to figure out return oninvestment. The measurement services that areout there just tell you the nature of the audienceand the reach of your campaign—things that helpyou with media planning.”— Jim Spaeth, president, Advertising Research Foundation; Crain

Communications, 15 July 2002

US Media Planners’ Opinions Regarding theAdvertising Value of Various Media, 2003 (as a % ofrespondents)

Valuable Neutral Not valuable

Cable TV 83% 12% 5%

Network TV 77% 15% 8%

Magazines 74% 17% 9%

Radio 73% 19% 8%

Online 70% 21% 9%

Newspapers 63% 24% 13%

Outdoor 55% 32% 13%

Newsletters 41% 34% 25%

Source: MediaPost, InsightExpress, February 2003



127


Methodology




Cross-Media Trends


Index of Charts

Several following sections will examine such standard advertising metricsas reach, frequency, and gross rating points (GRPs). For now, we will focuson the most basic question for marketers: “What are your onlineadvertising objectives?”

In a study conducted by DoubleClick in the fall of last year, 82% of the 200ad managers, brand managers, chief marketing officers, and vice presidentsof marketing from B2B and B2C companies cited building brand awarenessas their objective. That’s a 7-point jump from the spring 2002 results.

And yet direct response goals are nearly just as important, with 69% of respondents saying they advertise online to acquire new leads,registrants, customers, or clients. Again, that figure represents an uptickfrom earlier results.

Online Advertising Objectives among US Marketers,2002 (as a % of respondents)

Building brand awareness

75%

82%

Acquiring new leads/registrants/customers/clients

59%

69%

Driving immediate sales

43%

52%

Driving retention

40%

51%

Upselling to existing customers/clients

28%

44%

Providing company or product information

38%

58%

Spring DoubleClick study Fall DoubleClick study

Note: n=190 for Spring and 200 for FallSource: DoubleClick, December 2002



128


Methodology




Cross-Media Trends


Index of Charts

And according to several studies, the affluent, business executives, and theat-work audience—all prime marketing targets—see the need to reach themvia cross-media advertising.

For example, the WashingtonPost.com and Nielsen//NetRatings askednearly 1,000 affluent US adults which media they believe are best to reachpeople like themselves—that is, those with household incomes of $100,000or more. While 63% said they would definitely or probably includenewspapers in an ad campaign to reach people like themselves, and 62%cited television, the Internet followed closely at 58%. That figure issubstantially higher than the 45% the affluent respondents attached tomagazines or radio.

Advertising Media that Affluent US Adults WouldDefinitely or Probably Include in a Campaign to ReachPeople Like Themselves, January 2003 (as a % ofrespondents)

Newspapers 63%

Television 62%

Internet 58%

Magazines 45%

Radio 45%

Note: n=956 washingtonpost.com users with household income >$100KSource: Nielsen//NetRatings, washingtonpost.com, March 2003



129


Methodology




Cross-Media Trends


Index of Charts

In an earlier survey from the WashingtonPost.com andNielsen//NetRatings, this along with MORI Research, they asked a group of“business decision makers” a similar question: Which media would they usein an advertising campaign targeted at them? In this case, the definitely-and probably-include figures for the Internet reached 61%. That’s higherthan the 33% and 47% figures, respectively, for TV and newspapers.

Media Suggested by US “Business Decision Makers”for Use in an Advertising Campaign Targeted at Them,2002 (as a % of respondents)

Internet TV Radio News-papers

Magazines

Definitely include 36% 20% 12% 21% 25%

Probably include 25% 13% 19% 26% 30%

Might or might not include 14% 15% 18% 19% 14%

Probably not include 6% 12% 13% 7% 6%

Definitely not include 5% 16% 14% 8% 6%

Don’t know/ refused 7% 8% 8% 7% 8%

Note: Respondents included in this study are “business decision makers”who answered “yes” to one or more categories for the following question:“Do you, personally and directly, participate in or influence the decision topurchase any of the following for your company?” Answers included:ASPs/Internet Access Services/Website Hosting Services, Legal Services;Business Consulting Services; IT Technology Consulting Services, etc.;multiple responses allowedSource: Nielsen//NetRatings @Plan, MORI Research andwashingtonpost.com, September 2002



130


Methodology




Cross-Media Trends


Index of Charts

The Internet is also the place where 47% of those business decision makerssay the advertising is rich in information. Only magazines, among othermedia, approach that figure, at 42%.

Opinions of “Business Decision Makers” Regardingthe Advertising They Encounter, by Media Type, 2002(as a % of respondents)

Where to receive infor-mation about products

Where modern and up-to-date companiesadvertise

Has advertising that isrich in information

Has innovative adver-tising

Has interesting adver-tising

Where traditional com-panies advertise

Inter-net

77%

72%

47%

43%

30%

20%

TV

7%

53%

8%

50%

54%

78%

Radio

6%

28%

5%

13%

21%

49%

News-papers

23%

31%

29%

8%

16%

68%

Maga-zines

32%

58%

42%

23%

38%

58%

Noneof

these

4%

2%

15%

11%

13%

1%

Don’tknow/

refused

4%

5%

5%

8%

6%

5%

Note: Respondents included in this study are “business decision makers”who answered “yes” to one or more categories for the following question:“Do you, personally and directly, participate in or influence the decision topurchase any of the following for your company?” Answers included:ASPs/Internet Access Services/Website Hosting Services, Legal Services;Business Consulting Services; IT Technology Consulting Services, etc.;multiple responses allowedSource: Nielsen//NetRatings @Plan, MORI Research andwashingtonpost.com , September 2002



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In addition, recent research sponsored by the Online Publishers Associationfinds that the at-work audience prefers the Internet over TV, radio,magazines, and newspapers for finding out about new products and gettinginformation about goods and companies.

“Web marketing is effective—especially when usedin tandem with other media and in ways thatrespect the user—and is likely to grow larger andmore important with the passage of time. Yes, ithas more evolving to do, but it is evolving fast.”— Rishad Tobaccowala, president, Starcom IP; Slate.com, January 2003

Implementing campaigns across media to reach groups such as the affluentor at-work users is harder than it may seem. Just because an advertiserknows where the audience is and what the audience is looking for fails toaccount for existing obstacles within the marketer’s organization. In aReveries.com survey last year sponsored by Arc Marketing—a Greenwich,CT-based firm—200 ad agency and corporate marketing executives wereasked to what degree their companies were organized to deliver what theresearchers called “integrated marketing.”

Whether at an agency or corporation, 25% replied not at all, while only8% and 5%, respectively, responded by saying significantly. The maincauses for the disconnect between the desire for cross-media marketing andits implementation are “organizational silos within companies, a lack ofclear agency leadership, and the need for better and broader cross trainingof staff members,” according to Arc.

Attitudes toward Advertising among At-Work InternetUsers in the US, by Medium, 2003 (as a % ofrespondents)

Where I prefer to find out about newproducts

Where I prefer to receive informationabout companies

Has advertising that is rich ininformation

Has advertising that helps medecide what to buy

Internet

53%

52%

42%

41%

TV

37%

20%

22%

38%

Radio

8%

5%

10%

14%

Maga-zines

29%

23%

35%

31%

News-papers

13%

20%

23%

24%

Note: n=1,053Source: Millward Brown IntelliQuest, Online Publishers Association (OPA),May 2003



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As reported by MediaPost, the respondents also mentioned “the need forimproved information resources, better measurement capabilities, and evenchanges in compensation structures that would gauge total performance,not just discipline-specific work.”

Ad agencies Corporate marketingdepartments

Somewhat67%

Signifi-cantly8%

Not at all25%

Somewhat70%

Signifi-cantly5%

Not at all25%

Degree to Which US Ad Agencies and CorporateMarketing Departments Have Organized to DeliverIntegrated Marketing, 2002 (as a % of respondents)

Note: n=210 for agencies, 209 for corporate marketing departmentSource: Reveries.com, December 2002



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B. Media Measurement:Apples to Apples?Among online advertising professionals, two schools of thought competewhen it comes to metrics for planning and measuring ads on the Internet.

One school insists that the main way, if not the only way, the ad industrywill accept the Internet among the mainstream media is by comparingapples to apples. That means after years of pitching metrics such as uniquevisitors, page views, and click-through rates (CTRs), interactive ad agenciesand publishers would deploy only traditional metrics—measuring toolsused for decades by media such as TV and print.

Or as MediaPost wrote, “As integration of offline and online advertisingbecomes the industry standard, the ability to compare all media placementsusing a common denominator has become imperative.”

The four traditional metrics most commonly advanced are:■ Reach—the percentage of the total market population, or identifiable

audience, that will see a given advertisement or campaign over aspecified period of time

■ Frequency—the number of times people are exposed to that givenadvertisement or campaign over a specified period of time

■ Gross ratings points (GRPs)—a measure of advertising coverage; or, thepercentage of an audience reached multiplied by the number of timesthey see the message over some period of time (reach x frequency)

■ Targeted ratings points (TRPs)—the form of GRPs targeted to the advertiser’s desired audience by specific demographics and psychographics

An alternative method for calculating GRP coverage has you multiplyreach (in absolute numbers) by frequency, and dividing that figure by theaudience size times 100. For example, if an ad reaches 20 million people ata frequency of 2.5 times each within a potential audience of 90 million, theGRP figure is 55.56.

In addition, Internet ad professionals who encourage the use of thesetime-tested metrics also tend to support surveys and sophisticated testingto measure the brand impact of a campaign. These traditional brandingmetrics include awareness, recall, interest, and purchase intent.

The competing perspective dates back to 20th century days when peoplewent around saying, “The Internet changes everything.” That schoolbelieves that as the most measurable medium ever, online advertisingshould be sold using metrics as unique as the Internet itself. They say thatGRPs and the reach/frequency curve are based on projections andstatistical modeling—but given its inherent trackability, the Internet shouldbe able to move beyond projections and models to measure what’s actuallygoing on.


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“There have been two major barriers to the growthof online advertising: it is highly complex and thereis a lack of standardized metrics that compareonline media and offline media.”— Tom Sperry, president, Atlas DMT

They say that reducing the Web to old-fashioned (and limited) metrics willsell it short. They say that such traditional metrics as GRPs or TRPs areinadequate even for traditional media. And they say that while impressionsand traffic and CTRs may be somewhat worn-out, trying to compare theInternet to television is setting up the Net for failure.

If describing this Internet-is-unique-therefore-its-ad-metrics-should-also-be-unique school of thought sounds as if we’re setting up a straw manonly to knock it down, first consider this:

■ All too often, interactive agencies and Web sites still talk about traffic,click-through rates, page views, and other metrics that are irrelevant tomost advertisers’ objectives.

■ As a medium started by tech nerds rather than media folks, onlineadvertising built up barriers by creating new words for every normalmedia word out there—not audience but users; not circulation but traffic;not frequency but impression. And this different language continues tospread a fog among advertisers accustomed to traditional terminology.

■ And those barriers aren’t simply ones created by distinct terminology.The lack of ad metric standards makes it “difficult to work in a teamenvironment and try to share information when we don’t have thecommon tools and metrics,” said Jean Pundiak, the senior e-marketingmanager at AstraZeneca, to iMedia Connection in January 2003.

“Our industry needs to speak the same language asthat of traditional advertising.”— Cory Treffiletti, media director, Freestyle Interactive; MediaPost, 27

September 2002

Then consider the following:As an Internet-only ad metric, impressions count page requests from a

user’s browser. Even though the term implies that some pair of eyes vieweda particular ad at least once, impressions gauge only undifferentiated pagerequests—filtered, at least, from robotic views. While the untargeted natureof raw impressions makes them an unsuitable metric for many traditionaladvertisers, many Web publishers still base the cost of ads on an impressioncount and some companies choose which sites to advertise on based onhow many impressions those publishers promise.


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That’s one reason why researchers continue to track impressions.According to Jupiter Research, the number of impressions per Internet userper day will soar from 658 this year to 836 by 2007. That represents a 27%increase over the five-year span.

US Online Marketing Impressions per Internet Userper Day, 2001-2007

2001 554

2002 610

2003 658

2004 718

2005 779

2006 808

2007 836




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Next, consider the following research from the Myers Group. When the NewYork-based firm asked US ad execs which methods they expect to use toplan or measure online advertising, over 94% mentioned click-through rates(CTRs). And yet, as people click less and less on ads—and yet continue to beinfluenced by them—CTRs have become nearly outmoded as a useful metricfor assessing the true effect of online ads. But they sure are easy to measure.

Methods to Plan or Measure Online Advertising thatUS Advertising Executives Expect to Use in the Next12 Months, August 2002 (as a % of respondents)

Click-through rates

94.2%

Web site traffic

90.1%

E-Mail responses

88.2%

Online conversion rates

83.1%

Third-party ad server reporting

80.5%

Web sites ad server reporting

75.3%

Impressions by demographics

60.0%

Pre/post brand tracking

58.0%

Online reach/frequency models

57.7%

Technology aided; cookies (Dynamic Logic)

55.9%

Media industry association research (IAB)

48.5%

Cross-media reach/frequency tools

46.7%

Media-mix modeling (sales impact)

34.7%




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And last year when Jupiter asked US marketers how they measure online adcampaigns, click-throughs also came out on top, with 67% of theresponses. The research firm concluded from this data that “stakeholdershave failed to sell the true value proposition of online advertising” sinceonly 34% of “marketing departments regularly track any long-termmetrics” such as predictive behavior (at 16%) and branding (at 9%).

“The problem is that the click-through is not really agood measure. People won’t click unless they havea real need at that moment. But even if you do notclick, you still see the message. So we’ve foundthat branding is really the essence of advertising.”— Hairong Li, editor, Journal of Interactive Advertising; The New York Times,

15 January 2002

Since branding objectives need time to develop, and the CTR is a short-term metric, it appears that there’s a disconnect between online ad metricsand overall advertising goals. (Remember: 82% of US marketers toldDoubleClick that branding awareness is their prime objective.)

Metrics US Marketers Use to Measure OnlineAdvertising Campaigns, 2002 (as a % of respondents)

Click-throughs 67%

Registrations 65%

Purchases 51%

Referrals 30%

Predictive behavior for the future 16%

Long-term behavior 9%

Branding (awareness, interest, intent) 9%

Other 3%

Note: n=43; multiple responses allowedSource: Jupiter Research, February 2002



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And as an indicator of the continuing click-through metric, DoubleClickresearch shows a steady state for average CTRs worldwide, at about 0.7%during the four quarters of 2002.

Now contrast those primarily Internet-only advertising metrics with atraditional, cross-media metric—the aforementioned GRP. In one of itsperiodic cross-media studies, DoubleClick pulled together the GRPs of thetop 25 US Web sites, TV shows, and magazines from three differentsources—looked at by targeted demographics.

Take the core group of adults, ages 25 to 54. At 271, the GRP for the top25 Web sites is a bit higher than for magazines, at 259, and substantiallyhigher than for TV, at 186.

“Let’s settle quickly on the standards to measureonline GRPs—without petty industry bickering.”— Mike Warsinske, CEO, Hula Media; AdBumb, 5 June 2002

Average Click-Through Rates for Online AdsWorldwide, Q1 2002-Q4 2002

Q1 2002 0.72%

Q2 2002 0.69%

Q3 2002 0.69%

Q4 2002 0.72%

Note: results based on 630 billion ads generated by DoubleClick clientsSource: DoubleClick, January 2003



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Part of what this means is that even though the Web has more sites than TVhas shows (even with cable included), the top sites are more concentratedthan the top shows. This GRP comparison promises at least two things: abetter chance of targeting with fewer buys on the Internet, and a betterchance of wooing traditional advertisers (often aka, brand advertisers)through metrics that speak their language.

Then DoubleClick took those GRP figures above and averaged them amongthe top-25 sites, shows, and publications. The more focused nature of themost-popular Web sites and magazines gives them higher ratings than thegeneral audience for broadcast television.

“My oft-used phrase when discussing the matter ofmetrics used in offline media applied to onlinemedia: if you want to convert the natives it is bestto use their language.”— Jim Meskauskas, chief strategic officer, Underscore Marketing,

MediaPost, 5 December 2002

GRPs* of Top 25 US Web Sites, TV Shows andMagazines, by Demographic Group, 2001 & 2002

WebSites (1)

TVshows (2)

Maga-zines (3)

Adults 18+ 217 184 244

Adults 18-34 248 161 273

Adults 18-49 254 172 257

Adults 25-54 271 186 259

Men 18-49 274 153 258

Women 18-49 244 192 348

Blacks 18-49 180 174 416

Teens 12-17 213 114 298

Adults 18-49, household income $75,000+ 268 187 282

Adults 25-54, household income $75,000+ 284 211 287

Men 18-49, household income $75,000+ 303 166 291

Women 18-49, household income $75,000+ 228 214 378

Note: *GRPs=gross rating points; total GRPs arrived at by adding the ratingof each of the top 25 vehicles of each mediumSource: (1) Nielsen//NetRatings, May 2002; (2) Nielsen/NTI, October2001-February 2002; (3) MRI, Fall 2001



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Here’s how this data might come into play: Say if a company’s marketingdepartment wants to reach men, ages 18 to 49, with household incomes of$75,000 or higher. With an average GRP of 12.1, the Web appears a farbetter buy than TV, at 6.6 average GRP. For women the same age, sameincome, magazines boast a higher GRP than the Web.

In fact, in every demographic slice shown below, the Web or magazinesgarner higher average GRPs than does TV.

Continuing to reduce the language barriers—in this case by looking atcomparative audiences, not users—let’s examine how many people view orread the top dozen Web sites, TV shows, and magazines. In gross numbers(that is, undifferentiated by demographic data), more people read “People”magazine, at 26.6 million, than visit any single site or watch any top TVprogram. (Of course, even this chart reflects an inconsistent use of jargon,since magazines often also talk of “circulation,” not “audience.”)

“It used to be that online ads were defined by click-through rates. Now, they’re being evaluated onmind share and audience reach.”— Nick Nyhan, president, Dynamic Logic; Philadelphia Inquirer, 13

December 2001

Average GRP* among Top 25 US Web Sites, TV Shows,and Magazines, by Demographic Group, 2001 & 2002

WebSites (1)

TVshows (2)

Maga-zines (3)

Adults 18+ 8.7 7.4 9.8

Adults 18-34 9.9 6.4 10.9

Adults 18-49 10.2 6.9 10.3

Adults 25-54 10.8 7.4 10.4

Men 18-49 11.0 6.1 10.3

Women 18-49 9.8 7.7 13.9

Blacks 18-49 7.2 7.0 16.6

Teens 12-17 8.5 4.6 11.9

Adults 18-49, household income $75,000+ 10.7 7.5 11.3

Adults 25-54, household income $75,000+ 11.4 8.4 11.5

Men 18-49, household income $75,000+ 12.1 6.6 11.6

Women 18-49, household income$75,000+

9.1 8.6 15.1

Note: *GRP=gross rating points; average GRPs arrived at by adding therating of each of the top 25 vehicles of each medium and then dividing thatfigure by 25Source: (1) Nielsen//NetRatings, May 2002; (2) Nielsen/NTI, October2001-February 2002; (3) MRI, Fall 2001



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However, the top Web sites in general match up well to the top magazines.For example, the audience of 22.7 million at MSN Hotmail is nearly thesame as the 22.8 million who read “Reader’s Digest” and more than the 22.5million audience for “Better Homes & Gardens.”

Furthermore, the top TV audience in the October 2001 to February 2002timeframe was the 14.7 million people watching “Friends.” Even theseventh-ranked Web site, that for Yahoo! Geocities, had a larger audience.

While imperfect and still evolving, this kind of apples-to-applesmeasurement puts the Internet medium in a light just as bright as that oftraditional media. Perhaps more importantly, it shows marketers theInternet in a frame that’s easily comparable by the tools they’re accustomedto using.

“The survival of online advertising depends on itscomparability between and among other forms ofmedia. It will only be with apples-to-applescomparisons that marketing and media directorswill be able to shift marketing dollars from othermedia and other channels to online.”— Dave Morgan, CEO, Tacoda Systems; iMedia Connection, 22 January 2003

Audience Size of US Adults Ages 18-49 among Top 12Web Sites, TV Shows, and Magazines, 2001 & 2002 (inmillions)Web Sites (1)

Yahoo! Search

MSN Hotmail

MSN Search

Google

Yahoo! Shopping

eBay

Yahoo! Geocities

AOL Search

MSNBC

Weather Channel

Monster.com

Average

22.8

22.7

22.6

20.8

18.4

17.6

17.2

13.1

10.4

10.3

10.1

16.6

TV shows (2)

Friends

ER

Will & Grace

Survivor

CSI

EveryoneLovesRaymond

Law & Order

West Wing

Frasier

Simpsons

Fear Factor

Average

14.7

13.3

10.9

10.7

10.6

10.1

8.8

8.4

8.1

8.0

7.2

10.0

Magazines (3)

People

Reader's Digest

Better Homes &Gardens

TV Guide

National Geographic

Sports Illustrated

Cosmopolitan

GoodHousekeeping

Newsweek

Family Circle

Martha Stewart

Average

26.6

22.8

22.5

20.1

19.6

16.2

14.6

14.2

12.6

12.2

9.4

17.1

Source: (1) Nielsen//NetRatings, May 2002; (2) Nielsen/NTI, October2001-February 2002; (3) MRI, Fall 2001



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For another example, the basic cross-media element of reach is the primefactor that influences US media planners when selecting media, accordingto 61% of the respondents to MediaPost research. Basic, because alladvertisers need to know the percentage of the target audience that willsee/hear/read any specific ad or campaign.

Factors that Influence US Media Planners WhenSelecting Media, 2003 (as a % of respondents)

Reach 61%

CPM 53%

Quality of ad environment 40%

Coverage 37%

Editorial content 30%

Composition 29%

Integrated offerings 14%

Online and offline presence 10%

Buzz 7%

Sister publication discount rates 5%




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Cross-Media Metric ToolsUsing various tech tools, several companies support the growing use ofreach, frequency, and GRP metrics. For instance, in March of this year,comScore Media Metrix introduced for its clients a reach/frequencyanalysis system, combined with another traditional metric targeting tool, adaypart analysis module. And Nielsen//NetRatings and InteractiveMarketing Systems (IMS)—two companies under the VNU umbrella—sell amedia-planning-and-analysis software suite called WebRF.

“We’re just talking about applying offline metrics toonline advertising. That in and of itself isn’tvaluable to me.”— Christian Kugel, associate director, Starcom IP; AdAge, 5 August 2002

In December 2002, Atlas DMT—a division of Seattle-based Avenue A—introduced version 3.0 of its GRP and Reach Forecaster. This new versionturned what had been a client-only tool into a standalone product. Moreimportant, the forecasting tool combines data from both ad servers anduser panels, the methodology recommended by the Advertising ResearchFoundation (ARF). Atlas DMT’s own serving software harvests the ad-serving data, while comScore Media Metrix supplies the panel-based data.

The GRP and reach tool “determines who a given media plan will reachand how many times each person in the target audience will be exposed tothe campaign,” writes Internet Advertising Report. “In this newest version,the tool also lets planners see what percentage of the total target audiencewould be reached by a campaign, as well as what percentage of the onlinetarget audience would be reached.”

These tools help the online ad industry demonstrate how the Internet is amass-reach medium.

“It’s crucial for the online industry to have the same level of sophisticated research tools astraditional media.”— Susan Nathan, senior vice president, Universal McCann; MediaPost, 7

October 2002

For instance, Young-Bean Soon, the director of analytics at Atlas DMT,supplied a sample spending forecast to eMarketer—a scenario for reaching51% of US adults ages 18 to 54 with an online ad budget of $1 million. Thishypothetical example spreads 333 million impressions (276 million ofwhich were targeted) over 25 large sites, and achieves an unduplicatedtarget reach of over 51%. The cost assumption behind the $1 million spendis an average effective CPM of $3.


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Note how the big three of AOL, MSN, and Yahoo! represent 24.5% ofimpressions and nearly 50% (48.7%, to be exact) of the unduplicated reach.Note, too, how the target reach among the sites ranges from 9.95% atYahoo! down to 0.61% at CBS MarketWatch. The average target reachcomes midway at 3.63%.

Sample Media Plan to Reach Half of US Householdsvia Online Advertising, 2003

About.com

Advertising.com

AmericaOnline

Ask Jeeves

CBSMarketwatch

Classmates

CNET.com

CNN.com

ESPN

InfoSpaceSales

Looksmart

LycosNetwork

Mapquest

Monster

MSN Network

MSNBC

MTV

NASCAR.com

New YorkTimes Digital

Orbitz

PremiumNetwork

ValueClick

Weather.com

Yahoo!

ZDNet

Totals

Sitesize (1)

19,788,000

122,026,000

69,011,000

14,624,000

5,165,000

31,742,000

12,989,000

21,743,000

7,258,000

25,287,000

4,600,000

36,165,000

18,435,000

9,547,000

87,600,000

16,367,000

6,957,000

3,681,000

7,796,000

7,235,000

40,171,000

121,745,000

13,044,000

93,768,000

10,141,000

–

Totalspend

$50,000

$65,000

$80,000

$30,000

$10,000

$50,000

$32,000

$55,000

$23,000

$45,000

$12,000

$55,000

$25,000

$25,000

$75,000

$35,000

$25,000

$10,000

$24,000

$24,000

$40,000

$60,000

$35,000

$90,000

$25,000

$1,000,000

Targetimpres-sions (2)

13,939,668

17,923,022

22,170,526

8,425,864

2,531,604

13,596,132

8,830,889

14,996,220

6,565,642

12,743,394

3,097,525

15,227,587

7,003,759

7,211,978

20,603,237

9,242,660

7,457,045

2,796,487

6,351,918

6,275,287

11,380,022

16,564,388

9,571,611

24,754,492

6,856,554

276,117,511

Targetreach (3)

8,152,166

12,656,800

13,742,923

4,187,365

974,438

6,730,635

4,564,752

8,635,814

2,270,699

5,523,951

1,270,665

7,665,088

2,291,503

3,401,175

10,278,946

4,565,887

2,937,955

1,289,834

2,347,026

2,516,645

5,923,841

10,406,004

4,647,257

16,015,138

3,050,770

146,047,277

Aver-agefre-

quen-cy (4)

1.71

1.42

1.61

2.01

2.60

2.02

1.93

1.74

2.89

2.31

2.44

1.99

3.06

2.12

2.00

2.02

2.54

2.17

2.71

2.49

1.92

1.59

2.06

1.55

2.25

1.89

Tar-get

reach% (5)

5.06%

7.86%

8.54%

2.60%

0.61%

4.18%

2.84%

5.36%

1.41%

3.43%

0.79%

4.76%

1.42%

2.11%

6.38%

2.84%

1.82%

0.80%

1.46%

1.56%

3.68%

6.46%

2.89%

9.95%

1.89%

90.71%



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Drilling down to the costs, targeting rating points, and cost per point, itappears that the $1 million buys 171.49 TRPs worth of coverage. Theaverage TRP among the 25 sites is 12.20, while the average cost for buyingeach rating point is $5,831.

Undupli-catedTotals

– – – 82,179,529 3.36 51.04%

Note: Total offline target population=161,013,000 heads of household ages18-54; (1) number of unique visitors in one month; (2) total number ofadvertising exposures on this site to users in the target demographic; (3)number of people in the target who will have the opportunity to see anonline advertisement at least once; (4) average number of advertisingexposures to users on this site in the target; (5) target reach expressed asa percentage of the total offline target populationSource: Atlas DMT, comScore Networks, January 2003


Costs and Targeted Rating Points for Sample MediaPlan to Reach Half of US Households via OnlineAdvertising, 2003

Total spend TRPs (1) CPP (2)

About.com $50,000 8.66 $5,775

Advertising.com $65,000 11.13 $5,839

America Online $80,000 13.77 $5,810

Ask Jeeves $30,000 5.23 $5,733

CBS Marketwatch $10,000 1.57 $6,360

Classmates $50,000 8.44 $5,921

CNET.com $32,000 5.48 $5,835

CNN.com $55,000 9.31 $5,905

ESPN $23,000 4.08 $5,640

InfoSpace Sales $45,000 7.91 $5,686

Looksmart $12,000 1.92 $6,238

Lycos Network $55,000 9.46 $5,816

Mapquest $25,000 4.35 $5,747

Monster $25,000 4.48 $5,581

MSN Network $75,000 12.80 $5,861

MSNBC $35,000 5.74 $6,097

MTV $25,000 4.63 $5,398

NASCAR.com $10,000 1.74 $5,758

New York Times Digital $24,000 3.94 $6,084

Orbitz $24,000 3.90 $6,158

ValueClick $60,000 10.29 $5,832

Premium Network $40,000 7.07 $5,659

Weather.com $35,000 5.94 $5,888

Yahoo! $90,000 15.37 $5,854



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Perhaps more important than the specific numbers of this sample onlinecampaign from Atlas is how relatively easy it has become to deploytraditional metrics in the service of interactive advertising.

“The Internet and the organizations associated withthe Internet have made remarkable progress tomove the whole area ahead. And I think they’vefinally now have reached a point where a lot of therequirements, in terms of being able to evaluatethe Internet along with traditional media, arevirtually there.”— Michael Drexler, chief executive officer, Zenith Optimedia USA;


We say “relatively easy,” since the move toward traditional metrics requiresmore Web publishers to find out more about the people who visit their sites.That means investing in research to catalog audiences into basicdemographic and psychographic groups—gender, age, household income,and education level, among other things, along with specific interests andad-viewing and consumer tendencies. “This information, coupled withmeasures of unique users, could be used to give advertisers an idea of howmany people they can reach with a given site,” writes ClickZ. “From there,it is easy to calculate GRPs and CPP.”

For more about Internet advertising measurements, see part one ofthis three-part series of reports, eMarketer’s “Online AdvertisingEssentials” at:http://www.emarketer.com/products/report.php?advert_on_ess_jun03

ZDNet $25,000 4.26 $5,871

Totals $1,000,000 171.49 $5,831

Unduplicated Totals – 171.49 –

Note: Total offline target population=161,013,000 heads of household ages18-54; (1) targeted rating points, usually defined as Reach *Frequency/(Target Audience Size); (2) cost per point, or total spend dividedby total TRPsSource: Atlas DMT, comScore Networks, January 2003


http://www.emarketer.com/products/report.php?advert_on_ess_jun03


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C. Cross-Media OptimizationEven if the questions are no longer black-or-white, Internet advertisingadvocates regularly look for ways to demonstrate how online complementsads on TV and other offline media. Perhaps the most heralded way is theCross Media Optimization Study (XMOS). Spearheaded by the InteractiveAdvertising Bureau, this ongoing research is conducted by Rex Briggs ofMarketing Evolution along with Dynamic Logic and Forrester Research.

The various reports within the study attempt to answer the question:“What is the optimal media mix to achieve marketing goals?” The primeXMOS focus so far examines which advertising vehicles at what frequencybest advance campaign objectives—such as purchase intent or greaterreach—for several consumer brands, and recently for B2B.

“The Internet gets into trouble on its own, but itplays well with others.”— Josh Rose, senior vice president and director, iDeutsch Los Angeles;

Media, April 2003

In the initial XMOS research for the Dove Nutrium soap bar, Unileverexecutives found that by increasing online ad spending from 2% to 15% ofthe same, unchanged budget, they’d get a general lift in branding metricsof 5 points, from 19% to 24%.

Measuring the Online Ad Impact for Unilever's DovePersonal Care Brand, 2002

Actual

2%

19%

Recommended

15%

24%

Percent of budget online Lift in branding metrics

Source: Unilever/Interactive Advertising Bureau (IAB), 2002



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Then, when measuring the effect of increased frequency on purchaseintent, the researchers saw a jump from a pre-campaign figure of 8.7% ofrespondents to an average of 14%. When the ad frequency was ratchetedup to 12.5 exposures, the purchase intent rose to 22.0%.

Even with that high-end frequency, the average online frequency amongthe female consumers targeted by the Dove brand remained at only 1.7—less than both print and television.

The IAB released that Dove research in early 2002. Toward the end of theyear, the trade organization published the second XMOS study, this one forMcDonald’s. In this case, the fast-food giant introduced its Grilled ChickenFlatbread Sandwich in a cross-media campaign across TV, radio, print, andonline. Among the 21 online publishers participating in the researchinclude AOL Time Warner, CNET Networks, Google, Disney Internet Group,Forbes.com, iVillage, MSN, New York Times Digital, Wall Street JournalOnline, Washingpost.Newsweek Interactive, and Yahoo!.

Purchase Intent for Dove Nutrium Bar, by Number ofOnline Ad Exposures, 2001 (as a % of femaleconsumers)

12.5 22.0%

8.9 14.1%

6.1 12.0%

3.1 14.2%

1.7 13.0%

Pre-campaign 8.7%

Note: during 6 week advertising campaign, 11 October through 16November 2001Source: Unilever/Interactive Advertising Bureau, 2002


Average Exposure of Female Consumers to DoveNutrium Bar Ads, by Medium, 2001 (in number ofimpressions)

Television 6.0

Print 2.6

Online 1.7

Note: during 6 week advertising campaign, 11 October through 16November 2001Source: Unilever/Interactive Advertising Bureau, 2002



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McDonald’s found that in the target group of adults ages 18 to 49, about20% are not heavy television users but are reachable primarily online. Inaddition, it found that online advertising, more than the other media, mostinfluences product image perception among the “key youth segment” ages15 to 24.

According to Marketing Evolution’s Briggs, “TV does not reach (or only

lightly covers) 27% of the 18-49 target market with online access.” Looked at

another way, 76% of these target consumers use the Internet one or more hours

daily—the 20% group in the chart above. “Using online advertising to reach

these otherwise elusive consumers provides better coverage of the overall

target audience,” says Briggs.

Target Audience* for McDonald's Cross-Media AdCampaign**, by Internet and TV Use Levels, 2002

Note: n=10,024; *target audience adults ages 18-49; **campaign forGrilled Chicken Flatbread SandwichSource: Interactive Advertising Bureau (IAB)/MarketingEvolution/Advertising Research Foundation (ARF)/Dynamic Logic, October2002


Lighter TV,lighter Internet6%Heavier TV,

lighter Internet15%

Lighter TV,heavier Internet20% Heavier TV,

heavier Internet59%


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The particular media mix for McDonald’s target audience of adults ages 18to 49 shows the largest share of targeted rating points (TRPs) allocated toTV ads, at 705.6, with online trailing at 5.9. Targeted rating pointsrepresent the percentage of your target audience reached (reach) multipliedby the number of times they will see the message over some period of time(frequency). The TRP figures in the chart below don’t follow that formulaexactly due to rounding.

However, McDonald’s found that by increasing online’s reach to 60%,product awareness would increase by 8.3 points among the target group.That awareness is reflected partially in the product image that McDonald’sattempted to arouse among consumers: that the Grilled Chicken Flatbreadsandwich has four attributes—new, exciting, different, and is a“combination of great flavors.”

Reach, Frequency, and Targeted Rating Points (TRPs)for McDonald's Cross-Media Ad Campaign*, byMedium, 2002

Reach Frequency TRPs

Television 84% 8.4 705.6

Radio** 57% 3.7 421.8

Magazines 11% 1.1 12.5

Online 3% 1.8 5.9

Note: n=10,024; *campaign for Grilled Chicken Flatbread Sandwich;**radio is local, therefore reach and frequency are estimated, with TRPs fortwo-week periodSource: Interactive Advertising Bureau (IAB)/MarketingEvolution/Advertising Research Foundation (ARF)/Dynamic Logic, October2002



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For each of these product image descriptions, the number of respondentswho said each described the new sandwich completely or somewhat whenonline was added to the advertising equation. Take the “different” attribute,which rose by 2.6 points from offline only and by 7.7 points from pre-campaign levels.

Then in June 2003, the IAB released further branding data from theMcDonald’s campaign. The Dynamic Logic researchers found that richmedia advertising (a 30-second interstitial) outperformed not only staticonline banners in boosting the sandwich’s image descriptions, but workedmore effectively than TV for two of the four attributes.

Product Image Responses* to McDonald'sCross-Media Ad Campaign**, 2002 (as a % ofrespondents)

Online and offline

73.2%

66.9%

45.7%

59.2%

Offline only

71.8%

64.3%

41.2%

55.0%

Pre-campaign

64.8%

59.2%

37.0%

48.8%

New Different Exciting Combination of great flavors

Note: n=10,024; *among respondents who said the ads described thesefour attributes completely or somewhat; **campaign for Grilled ChickenFlatbread SandwichSource: Interactive Advertising Bureau (IAB)/MarketingEvolution/Advertising Research Foundation (ARF)/Dynamic Logic, October2002



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That is, the online transitional ad boosted consumer perception that theproduct is different by 6.1%, compared to TV’s 5.7%. And the lift for theexciting attribute rose by 16.3% from the rich media ad relative to 5.0% liftfrom television.

The IAB released data in February 2003 for the next two case studies in theXMOS series: one for Colgate Total toothpaste, the other for Kleenex SoftPack tissue.

For the Colgate product, the campaign’s focus was to increase purchaseintent among the company’s target consumer group: occasional or non-users of the product, ages 18 to 49. Results showed a sharp uptake as theonline budget share grew, ranging from a 3.4% intent-to-purchase increasewith no online budget rising to a 4.3% intent to purchase when 11% of thead budget was spent online.

In addition to online’s contribution to increasing purchase intent, XMOSdata showed that it cost 23% more to encourage consumer purchase usingtelevision alone compared to using television along with online.

Comparative Branding Metrics for McDonald's Ad onTelevision and Online, 2003 (based on % incrementallift)

New

8.0%

3.9%

1.3%

Different

5.7%

6.1%

2.7%

Exciting

5.0%

16.3%

4.3%

Combination of great flavors

7.0%

9.2%

3.5%

Television* Transitional ad** Online all other formats***

Note: *30-second commercial; **a 550x480 pixel 30-second Superstitial(Unicast branded interstitial); ***includes banners (468x60), skyscrapers(160x60, 120x600 or 120x400), boxes (300x250, 510x425 or 550x480), andrectangles (210x275 or 260x140)Source: Interactive Advertising Bureau (IAB), June 2003



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The less than one-point change from an all offline budget to an 11% onlinebudget is small. However, even incremental increases might make adifference for a major brand with a major ad budget—especially when itinvolves just a reallocation of spending and no increased costs.

For the Kleenex brand, the research question looked at the ability of onlineadvertising to extend the campaign’s reach beyond television and print. Inits original budget, 75% of the overall ad dollars went to television, 22%for print, and 3% for online. This media mix was not optimal for reachingthe entire target market. More specifically, when targeting those notreached or only lightly covered by television, the combination of onlineand magazine advertising was the most effective for boosting aided brandawareness, brand image, purchase intent, and bundled trial intent.

Therefore, the IAB advised Kleenex to boost its online spending from 3%to 10% of its overall mix for optimal results. In fact, that 7-point budgetreallocation indicated that online advertising could potentially deliver 26%of the target audience.

Purchase Intent for Colgate Total Toothpaste, byShare of Budget Allocated to Online, 2003 (as a %increase pre-campaign)

Budget all offline* 3.4%

7% of budget online 3.8%

11% of budget online 4.3%

Note: Target audience is occasional or non-users of Colgate Total, ages18-49; *television and printSource: Interactive Advertising Bureau (IAB)/MarketingEvolution/Advertising Research Foundation (ARF)/Dynamic Logic, February2003



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In each of the four cross-media studies so far, results are based on goals.For example, Colgate’s goal was to increase purchase intent, McDonald’swanted to boost positive product images, while Kleenex hoped to increasereach among the part of their target market who rarely watch television. Ineach case, the brand found that by spending no more, but by shifting ashare of the budget to online, it could boost its branding results.

Briggs claims the results are better when online plays a larger role in themarketing mix for two key reasons:

1) Offline media hit diminishing returns, and online can help boost theoverall results by touching the same consumers in anothercomplementary environment.

2) Offline media miss/under-delivers to a segment of consumers, whichhappen to be reachable through online advertising.

Current and Recommended Online AdvertisingBudget Shares for Various Consumer Brands, 2003

Colgate Total toothpaste

7%

11%

Dove Nutrium soap bar

2%

15%

Kleenex Soft-Pack tissues

3%

10%

McDonald's Grilled Chicken Flatbread sandwich

1%

13%

Current Recommended

Note: Target audience is occasional or non-users of Colgate Total, ages18-49; *television and printSource: Interactive Advertising Bureau (IAB)/MarketingEvolution/Advertising Research Foundation (ARF)/Dynamic Logic, February2003



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That last point is supported by data such as the chart below from aMillward Brown IntelliQuest study done for the OPA, which shows a greaterpreference for online advertising among at-work Internet users versus lightTV viewers.

With all the research so far and still to come with the XMOS studies, concernsremain over whether the results apply to other marketers. Questions that needto be asked include: What ad formats are being used, both online and offline?Which formats are best for which product? How was scheduled reach andfrequency determined? What sites were the ads run on? What characteristicsof the targeted audience call for a cross-media approach?

“There are so many variables floating around here:creative, the type of ad unit, the Web sites. At theend of the day, do you really know what wasdriving your results?”— Geoff Ramsey, CEO, eMarketer; DM News, 2 April 2003

Attitudes toward Advertising among At-Work InternetUsers Who Are Light TV Viewers* in the US, byMedium, 2003 (as a % of respondents)

Where I prefer to find out about new products

53%

29%

Where I prefer to receive information about companies

51%

17%

Has advertising that is rich in information

38%

16%

Has advertising that helps me decide what to buy

39%

31%

Internet TV

Note: n=327 (light TV viewers, 36% of the at-work audience); *light TVviewers defined as those who view less than 2 hours 15 minutes oftelevision per day during the work weekSource: Millward Brown IntelliQuest, Online Publishers Association (OPA),May 2003



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In contrast, as Rishad Tobaccowala— president of Starcom IP, a Chicago-based cross-media ad firm—wrote in a fascinating exchange on Slate.com,“Increasingly, IP-based media is influencing and often taking over the gutsof all electronic media and advertising. Clients are beginning to use onlineadvertising in tandem with offline, not only as a complement to their offlinedollars but also to learn how to better measure and target the rest of theiradvertising. As many worry about the inevitable spread of personal videorecorders, they are realizing that Internet advertising will allow them tolearn about ways to better measure, better innovate, and better align withconsumer passions when the 30-second commercial grows less important.”

For the full text of “Will the Internet Become a Significant AdvertisingMedium?,” a three-part article that ran on Slate in January 2003, see:http://slate.msn.com/id/2076621/entry/2076656/

http://slate.msn.com/id/2076621/entry/2076656/


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D. Four More Cross-Media ScenariosThe more the online ad industry promotes cross-media marketing, the moreadvertisers need to see measured results that support aspects of a particularcampaign—and that the results could extend to their category. This need isparticularly strong among brand advertisers, who don’t always have directresponse results to rely on. Especially when it comes to anything new,advertisers resist because they don’t commit to anything until tested—andfor many, even today, the Internet is still seen as new.

Or as Jean Pundiak—the senior emarketing manager at AstraZeneca—recently told iMedia Connection when asked what are the obstaclespreventing her company from allocating a larger percent of hermarketing/advertising budget online, “Data—the research that shows thisreally works.”

One effort to overcome such resistance is a recent series of tests byDoubleClick and Nielsen//NetRatings that gauged the Internet’s effect ontraditional ad metrics over cross-media campaigns for four companies:

■ American Airlines■ Subaru■ Oscar Mayer■ Planters Peanuts

Each of the four sets of three charts below demonstrates the effect ofincreasing the Internet’s share of a non-changing ad budget on reach,frequency, and GRP for each company. In several cases, but not all, moremoney spent online boosts those three metrics. The two major variablesappear to be what category of product is being pitched and the exact natureof each company’s target.


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American AirlinesFor American Airlines, the campaign target was business and leisuretravelers, ages 25 to 54, with incomes of $60,000 or more. By redirecting aportion of the spend away from television and toward online media, thedeveloped planning scenario tripled the Internet’s share from 5%, as in theoriginal ad schedule, to 15%.

That increased Internet allocation resulted in a useful 3.1-point gain forreach, what DoubleClick described as an “insignificant frequency decline,”and a mild 2.2% GRP skip from 416 to 425. These results are not exactlyearth shattering.

“If we’re going to get in the game, we have to comeup with a combined reach and frequency.”— John Keck, interactive media director, Foote Cone & Belding; ZDNet

News, 13 May 2002

Effect of Increased Internet Ad Budget on Reach,Frequency, and GRPs* for American Airlines'Campaign, 2002

Reach Frequency GRP

5% Internet (original schedule) 61.1% 6.8 416

7% Internet 63.0% 6.8 426

15% Internet 64.2% 6.6 425

Note: targeted to business and leisure travelers, ages 25-54, incomes of$60K+;*GRPs=gross rating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003



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However, when the researchers broke down the high-level demographicdescription of the target audience by level of TV use, the GRP changesbecome magnified. While the GRP among heavy TV users declined by 5.5%as more money was spent on Internet ads, it shot up by 26.4% among light-to-medium TV users.

Similarly, boosting the budget for interactive media reduced frequency ofexposure to the airline’s ads by 11.1% among heavy TV users and increasedit by 19.9% among the light-to-medium TV users.

The significance of those GRP and frequency changes become clearer whenyou look at the underlying nature of those two groups: heavy TV users tendto have lower income and professional status, while lighter TV users notonly tend to have more money and status, they are also harder to reach bytelevision advertising, while available to marketers online.

Effect of Increased Internet Ad Budget on GRPs*among US TV Viewers for American Airlines'Campaign, by Frequency of TV Use, 2002

5% Internet (original schedule)

202.2

34.9

15% Internet

191.1

44.1

Heavy TV users Light-to-Medium TV users

Note: targeted to business and leisure travelers, ages 25-54, incomes of$60K+;*GRPs=gross rating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003


Effect of Increased Internet Ad Budget on Frequencyof Exposure among US TV Viewers for AmericanAirlines' Campaign, by Frequency of TV Use, 2002


16.57

2.86

15% Internet

14.73

3.43

Heavy TV users Light-to-Medium TV users

Note: targeted to business and leisure travelers, ages 25-54, incomes of$60K+Source: DoubleClick, Nielsen//NetRatings, March 2003



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SubaruMore than the American Airlines campaign, Subaru’s ads targeted an evenbroader swath: not just ages 25 to 54, with household incomes of $60,000or more, but all adults. In the Japanese car manufacturer’s case, themarketing department increased the Internet budget share from only oneonline placement to a 7% spend.

The overview effect of an increased Internet ad budget on the threemetrics shows a mild growth in reach, a negligible decrease in frequency,and a static GRP.

Note that even with the original ad schedule, Subaru reached an extremelyhigh level of its wide target audience. But it appears that a boost in onlinespending enhances results on the margins—among those people who, sincethey rarely watch TV, are better reached by the Internet and magazines.

In this case, increasing the Internet’s share to 7% translates to a GRPdecrease of 3.1% among TV junkies, but a corresponding 4.0% GRP uptickamong the more desirable segment of the entire target.

Effect of Increased Internet Ad Budget on Reach,Frequency, and GRPs* for Subaru's Campaign, 2002

Reach Frequency GRPs

Original schedule 94.7% 15.9 1,507

7% Internet 95.3% 15.8 1,507

Note: targeted to adults, ages 25-54, incomes of $60K+; *GRPs=grossrating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003


Effect of Increased Internet Ad Budget on GRPs*among US TV Viewers for Subaru's Campaign, byFrequency of TV Use, 2002

Original schedule

675.2

75.4

7% Internet

654.0

78.4

Heavy TV users Light TV users

Note: targeted to adults, ages 25-54, incomes of $60K+; *GRPs=grossrating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003



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Similarly, frequency of exposure to the Subaru campaign dropped by 3.8%among heavy TV users, but increased by 3.3% among light TV users.

Effect of Increased Internet Ad Budget on Frequencyof Exposure among US TV Viewers for Subaru'sCampaign, by Frequency of TV Use, 2002

Original schedule

35.66

3.98

7% Internet

34.30

4.11


Note: targeted to adults, ages 25-54, incomes of $60K+Source: DoubleClick, Nielsen//NetRatings, March 2003



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Oscar MayerWith the goal of convincing mothers to choose Oscar Mayer Lunchables fortheir children’s midday meal, the original ad schedule divided as follows:48% on national TV, broadcast and cable, including Lifetime and MarthaStewart; and 52% devoted to women’s magazines and mass-reachpublications such as “People.”

However, an analysis of the target group showed that 83% of the womenages 25 to 54 went online in the previous 30 days, and that this groupskewed younger and more educated. In addition, this online portionwatched less TV and read more magazines than the rest of the target.

This analysis became the rationale for redirecting 15% of the ad budgetonto the Internet. The overall results show a 4-point reach increase but twosignificant decreases of 1-point for frequency and 60 gross rating points.

The effect of the increased Internet ad budget made GRPs fall by 12.2%among heavy TV users and rise by 6.3% among light TV users. However,the decrease showed a 36-point drop, while the increase was only 1 point.

Effect of Increased Internet Ad Budget on Reach,Frequency, and GRPs* for Oscar Mayer's Campaign,2002


Original schedule 83% 6.9 571

15% Internet 87% 5.9 511

Note: targeted to women, ages 25-54; *GRPs=gross rating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003


Effect of Increased Internet Ad Budget on GRPs*among US TV Viewers for Oscar Mayer's Campaign, byFrequency of TV Use, 2002

Original schedule

296

16

15% Internet

260

17


Note: targeted to women, ages 25-54; *GRPs=gross rating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003



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The degree of change for frequency of exposure also showed a sharp dropamong heavy TV users and a small gain among light TV users.

These slight effects for Oscar Mayer’s online budget increase point toquestions of targeting. DoubleClick reported, “Online seems especiallyeffective for campaigns with more specific demographic qualifiers, such asthe presence of children in the household.” Two more demographicsignifiers for online campaigns are higher income and greater education.

Effect of Increased Internet Ad Budget on Frequencyof Exposure among US TV Viewers for Oscar Mayer'sCampaign, by Frequency of TV Use, 2002

Original schedule

17.82

0.96

15% Internet

15.03

1.01


Note: targeted to women, ages 25-54Source: DoubleClick, Nielsen//NetRatings, March 2003



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Planters PeanutsThe fourth cross-media advertising scenario found Planters Peanutstargeting younger adults, ages 18 to 34. The original ad schedule devoted72% of the budget to national TV, 25% to men’s interest magazines such asRolling Stone and Sports Illustrated, and tossed a 3% bone to high-reachmen’s sites like ESPN.com. (Why the DoubleClick research says the targetwas adults, but the ad spends focused on men, is not clear.)

In this case, the online portion of the target group—defined as those whoaccessed the Internet within the past 30 days—was a bit more than half, at57%. This segment tended to be younger and more educated than the 43%offline, and was more likely to have children.

Similar to the Oscar Mayer campaign, a budget-share increase to 15%Internet created increased reach, but decreased both frequency and GRP.

However, GRPs showed significant changes by television use analysis, with a 9.2% decrease among heavy TV users and a 26.3% increase amonglight users.

Effect of Increased Internet Ad Budget on Reach,Frequency, and GRPs* for Planters Peanuts'Campaign, 2002


3% Internet (original schedule) 92.0% 10.4 957

15% Internet 94.2% 9.8 927

Note: targeted to adults, ages 18-34; *GRPs=gross rating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003


Effect of Increased Internet Ad Budget on GRPs*among US TV Viewers for Planters Peanuts'Campaign, by Frequency of TV Use, 2002


433

38

15% Internet

393

48


Note: targeted to adults, ages 18-34; *GRPs=gross rating pointsSource: DoubleClick, Nielsen//NetRatings, March 2003



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Frequency of exposure to the Planters ads followed the same pattern: downby 11.1% among heavy TV users, up by 23.8% among the light users.

While the Planters target group was nearly as broad as Oscar Mayer’s,“shifting spending to online was more effective due to the age of thetarget,” writes DoubleClick. In fact, increasing the Internet spendingallocation by from a 3% to a 15% share helped them reach over 2 millionpreviously untouched, younger consumers.

Effect of Increased Internet Ad Budget on Frequencyof Exposure among US TV Viewers for PlantersPeanuts' Campaign, by Frequency of TV Use, 2002


23.5

2.1

15% Internet

20.9

2.6


Note: targeted to adults, ages 18-34Source: DoubleClick, Nielsen//NetRatings, March 2003



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Cross-Media Comparative SummaryFinding the right blend in a cross-media advertising campaign is not only amatter of exploring traditional metrics but balancing traditional concerns.That is, what are you trying to sell? And who are you selling to? (What’syour product? Who’s your audience?)

When you compare the effect of increased Internet ad budgets on GRPsand frequency of exposure across all four product campaigns, the pattern isclear: down for heavy TV users and up for light TV users.

Comparative Effect of Increased Internet Ad Budgetson GRPs* among US TV Viewers, by Frequency of TVUse, 2002 (as a % increase/decrease vs. originalbudget)

American Airlines*

-5.5%

26.4%

Subaru

-3.1%

4.0%

Oscar Mayer

-12.2%

6.3%

Planters Peanuts

-9.2%

26.3%


Note: Increased Internet budget shares: from 5% to 15% (AmericanAirlines), from near 0% to 7% (Subaru), from 0% to 15% (Oscar Mayer), from3% to 15% (Planters Peanuts); *light-to-medium TV usersSource: DoubleClick, Nielsen//NetRatings, March 2003



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What’s not as clear is the meaning behind the pattern. That is, should alladvertisers increase the Internet’s share in their budgets to boost metricssuch as GRP and frequency? If not, which advertisers? And even then, byhow much should they shift spending allocations to optimize results? Asthe common online chat group acronym derived from commercials goes:YMMV…or, your mileage may vary.

Comparative Effect of Increased Internet Ad Budgetson Frequency of Exposure among US TV Viewers, byFrequency of TV Use, 2002 (as a % increase/decreasevs. original budget)

American Airlines*

-11.1%

19.9%

Subaru

-3.8%

3.3%

Oscar Mayer-15.7%

5.2%

Planters Peanuts

-11.1%

23.8%


Note: Increased Internet budget shares: from 5% to 15% (AmericanAirlines), from near 0% to 7% (Subaru), from 0% to 15% (Oscar Mayer), from3% to 15% (Planters Peanuts); *light-to-medium TV usersSource: DoubleClick, Nielsen//NetRatings, March 2003



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E. Cross-Media: Driving Traffic OnlineResearch indicates that reallocating budgets within cross-media campaignsis far from the only way to lift branding objectives, as gauged by metricssuch as GRPs. Sometimes the cross-media influence operates from offlineto online, boosting branding indirectly by using advertising in traditionalmedia to drive traffic to product Web sites, as this series of three casestudies from Hitwise demonstrates.

By sponsoring the hit TV program “American Idol,” AT&T Wireless foundincreased visitor flow to its Web site. That show aired on Tuesday andWednesday each week, and the figures below show how the share oftelecommunications site visitors to the www.attws.com site peaked everyweek on Wednesday.

Daily US Visitors to the AT&T Wireless Web Site, 1March 2003 - 4 April 2003 (as % of visitors intelecommunications category)Date Day of Week Share

1 March 2003 Saturday 10.41%

2 March 2003 Sunday 11.25%

3 March 2003 Monday 11.75%

4 March 2003 Tuesday 12.05%

5 March 2003 Wednesday 13.10%

6 March 2003 Thursday 12.50%

7 March 2003 Friday 12.35%





















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Rarely do two companies in the same industry compete as directly as didBen & Jerry’s and Baskin & Robbins in late April of this year. Both firmsengaged in the exact same marketing campaign only one day apart: a freecone day at their US stores. And both campaigns were done across media,online and offline.

The US Web traffic figures from Hitwise show a run-up of visitors on 28April, one day before the Ben & Jerry’s offer and two days before theBaskin & Robbins one. While the shares of all Web surfers on that day,0.33% and 0.39%, respectively, may not seem like much, each figurerepresents an increase in absolute numbers of visitors of approximately120% each from 27 April.

On the 29th, the share of visitors increased once again, but more forBaskin & Robbins than for Ben & Jerry’s, whose free offer was that day.Then, while the visitor share to the Ben & Jerry’s Web site dropped off tonormal levels the next day, it soared to a 1.10% share at the Baskin &Robbins site on the 30th, the day of its free cone offer.

Hitwise claims that Baskin & Robbins “witnessed a larger increase inshare of US visits…as users flocked to the Web site to locate the neareststore.” While that is undoubtedly true, the import is not easily determined.In one speculative example, the greater increase at one site over the othermay have little to do with Baskin & Robbins’ marketing effectiveness overits rival. It might equally mean that more Internet users already knewwhere to find a local Ben & Jerry’s, but needed more help locating a Baskin& Robbins store.







1 April 2003 Tuesday 8.67%

2 April 2003 Wednesday 9.79%

3 April 2003 Thursday 9.17%

4 April 2003 Friday 9.47%

Note: AT&T Wireless sponsored the "American Idol" television show whichaired on Tuesday and WednesdaySource: Hitwise, June 2003



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Nevertheless, the link between retail promotions and Web site visits isclearly demonstrated here.

Old soft-drink rivals Coke and Pepsi have been wrestling for market sharelong before there were personal computers, let alone the Internet. But arecent campaign by Pepsi showed the potential effect of cross-media effortsin wooing Web site visitors. First note how on most of the 12 days chartedbelow, market leader Coke had a greater share of visitors than did Pepsi.

However, Pepsi ran a Beyonce Knowles commercial during the Oscars on23 March 2003. Simply put, on that day, traffic at the company’s Web sitesoared from a 0.11% visitor share to 0.45%. Again, while those numbersmay appear small, they represent a 309% rise in site visitors—a definiteeffect caused by the Knowles commercial.

Daily US Visitors to the Ben & Jerry's andBaskin-Robbins Web Sites, 17 April 2003-7 May 2003 (as a % of total US Web visitors)

www.benjerry.com www.baskinrobbins.com

17 Apr 2003 0.09% 0.07%

18 Apr 2003 0.09% 0.06%

19 Apr 2003 0.08% 0.04%

20 Apr 2003 0.05% 0.04%

21 Apr 2003 0.08% 0.09%

22 Apr 2003 0.22% 0.18%

23 Apr 2003 0.18% 0.25%

24 Apr 2003 0.21% 0.23%

25 Apr 2003 0.17% 0.22%

26 Apr 2003 0.15% 0.18%

27 Apr 2003 0.15% 0.18%

28 Apr 2003 0.33% 0.39%

29 Apr 2003 0.56% 0.65%

30 Apr 2003 0.12% 1.10%

1 May 2003 0.05% 0.20%

2 May 2003 0.06% 0.09%

3 May 2003 0.04% 0.08%

4 May 2003 0.04% 0.06%

5 May 2003 0.03% 0.04%

6 May 2003 0.03% 0.04%

7 May 2003 0.01% 0.05%

Note: Ben & Jerry's had a "free cone day" offer on 29 April 2003, andBaskin-Robbins had a "free cone day" offer on 30 April 2003Source: Hitwise, June 2003



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And the boost in visitors continued the next day, when Pepsi’s 0.34% sharewas nearly twice as large as Coke’s 0.18% share.

What any of these companies accomplished with the increased Web trafficis a whole other marketing matter. But by demonstrating a directconnection between offline advertising and boosts for online marketing,cross-media appears not just a wave of the future but an established trend.

Daily US Visitors to the Pepsi Cola and Coca-Cola WebSites, 15 March 2003-26 March 2003 (as a % of totalUS Web visitors)

www.pepsi.com www.coca-cola.com

15 Mar 2003 0.12% 0.13%

16 Mar 2003 0.11% 0.20%

17 Mar 2003 0.11% 0.14%

18 Mar 2003 0.13% 0.17%

19 Mar 2003 0.10% 0.15%

20 Mar 2003 0.15% 0.14%

21 Mar 2003 0.10% 0.13%

22 Mar 2003 0.11% 0.16%

23 Mar 2003 0.45% 0.19%

24 Mar 2003 0.34% 0.18%

25 Mar 2003 0.12% 0.17%

26 Mar 2003 0.09% 0.18%

Note: Pepsi ran a Beyonce Knowles commercial during the Oscars on 23March 2003Source: Hitwise, June 2003



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F. Consumer Media ConsumptionIn concert with increased Internet use both at home and at work, considerhow more and more people increasingly partake in various media as if theyhad just come across a gourmet all-you-can-eat restaurant—how muchmedia can one person consume in one day?

In its annual “Communications Industry Forecast” report, Veronis SuhlerStevenson tracks the annual media use among US consumers from 2000 to2006. To start with in the chart below, note the bottom line, the average perday media use. Not only does it grow steadily from 9.93 hours in 2002 to10.37 hours by 2006, consider these rough numbers: work = 8 hours;commute = 1 hour; sleep = 7 hours. That leaves 8 hours in a day, apparentlynot enough for that average media use. Unless, of course, you listen to theradio while driving, and watch TV while going online, and read periodicalswhile listening to music, and go online while at work, and so on.

The challenge for 21st century advertisers is finding ways to surmountthat split and make the most of it through cross-media marketing thattouches the consumer from various sides.

That said, the Veronis data also points to increased use of the consumerside of the Internet, from 157 hours annually in 2002, trailing the dailynewspaper at 175 hours, to 213 hours by 2006, trailing only TV and radio.

Annual Use of Media among US Consumers, 2000-2006(in hours)

TV (broadcast and cable)

Radio

Internet, consumer

Recorded music

Newspapers, daily

Home video (pre-recorded tapes)

Magazines, consumer

Video games

Books, consumer

Box office (movies)

iTV (video-on-demandonly)

Total

Average per day*

2000

1,640

964

106

264

179

46

121

75

111

12

2

3,519

9.64

2001

1,661

983

134

238

177

56

119

78

109

13

2

3,570

9.78

2002

1,661

1,001

157

228

175

77

117

84

107

13

2

3,623

9.93

2003

1,656

1,014

174

219

173

96

116

90

106

13

3

3,661

10.03

2004

1,669

1,032

189

211

172

109

115

95

105

14

3

3,715

10.18

2005

1,672

1,049

199

203

170

120

113

101

104

14

5

3,750

10.27

2006

1,679

1,062

213

195

169

126

112

106

103

14

6

3,785

10.37

Note: ranked by 2006 figures; numbers may not add to total due torounding; *average per day figures based on 365-day yearSource: Veronis Suhler Stevenson , July 2002



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Veronis projects the growth rate for consumer Internet usage over thewhole seven-year span at 100.9%, far above the 7.6% average, TV’s 2.4%growth, or the declining use of traditional reading matter such as the dailynewspaper, consumer magazines, and books.

“Today’s consumers are hearing overlappingmessages from advertisers. Simultaneous mediausage changes all the rules.”— Tom Holliday, president, Retail Advertising & Marketing

Association (RAMA)

Growth Rate in Media Use among US Consumers,2000-2006 (as a % increase/decrease)

iTV (video-on-demand only)

200.0%

Home video (prerecorded tapes)

173.9%

Internet, consumer

100.9%

Video games

41.3%

Box office (movies)

16.7%

Radio

10.2%

Total

7.6%

TV (broadcast and cable)

2.4%

Newspapers, daily

-5.6%

Books, consumer

-7.2%

Magazines, consumer

-7.4%

Recorded music

-26.1%

Source: Veronis Suhler Stevenson, July 2002; calculated by eMarketer,October 2002



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Similarly, Internet users spend anywhere from 115.7 minutes online daily according to RoperASW and AOL down to 43.0 minutes by VeronisSuhler’s estimates. Estimates from eMarketer indicate the sweet spot is anaverage of 65.0 minutes per day. To make an easier comparison to the TVuse chart above, those three figures translate to 1:56, 0:43, and 1.05 hoursper day, respectively.

When you contrast the Veronis Suhler figure of 157 annual hours ofInternet use among US consumers in 2002 to the UCLA Internet Reportfigures below, a sharp dichotomy appears. With a 2002 average of 11.1hours per week spent online by US Internet users, that translates to 577.2hours annually—far above the Veronis figure.

Comparative Estimates: Average Time Spent Onlineby Internet Users in the US, 2002 (in minutes per day)

America Online/RoperASW, March 2003 (1)

115.7

Nielsen//NetRatings, February 2003 (1) (2)

100.4

UCLA Center for Communication Policy, February 2003 (3)

95.1

Arbitron/Edison Media Research, February 2003 (3)

80.0

Harris Interactive, April 2002 (3)

68.6

eMarketer, June 2003 (3)

65.0

comScore Media Metrix, February 2003 (3)

62.3

Veronis Suhler Stevenson, July 2002 (4)

43.0

Note: (1) home and work usage; (2) based on changed methodology thatincludes desktop applications connected to the Internet; (3) usage fromany location; (4) calculated based on Veronis figure of time online per yearfor all consumers and Internet user penetration rate of 60%; (5) thesenumbers have been calculated by eMarketer based on the hourly, dailyand/or weekly estimates of each research firmSource: various, as noted, 2002 & 2003; eMarketer calculations (5), June2003



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The Internet usage figure from Veronis falls short of the UCLA research for two reasons: One, Veronis looks at consumer Internet use only, notcounting the hours spent at work or at school. Two, while the UCLA report looks at hours online among Internet users, the Veronis report looks at all US consumers, not just those who go online. This reduces theaverage significantly.

Even when you attempt to even out the Veronis estimates by factoring inthe average Internet user penetration rate of 60%, the merchant bank’sInternet usage reaches only 260.9 hours per year. Projections fromeMarketer put annual Internet use at about 400 hours, similar to estimatesfrom comScore and Harris.

Average Number of Hours Spent Online per Week byInternet Users in the US, 2000-2002

2000 9.4

2001 9.8

2002 11.1

Source: UCLA Center for Communication Policy, February 2003


Comparative Estimates: Average Time Spent Onlineby Internet Users in the US, 2002 (in hours per weekand per year)

Week Year (5)

America Online/RoperASW, March 2003 (1) 13.5 701.9

Nielsen//NetRatings, February 2003 (1) (2) 11.7 609.1

UCLA Center for Communication Policy, February 2003 (3) 11.1 577.2

Arbitron/Edison Media Research, February 2003 (3) 9.3 485.3

Harris Interactive, April 2002 (3) 8.0 416.2

eMarketer, June 2003 (3) 7.6 394.3

comScore Media Metrix, February 2003 (3) 7.3 378.0

Veronis Suhler Stevenson, July 2002 (4) 5.0 260.9

Note: (1) home and work usage; (2) based on changed methodology thatincludes desktop applications connected to the Internet; (3) usage fromany location; (4) calculated based on Veronis figure of time online per yearfor all consumers and Internet user penetration rate of 60%; (5) thesenumbers have been calculated by eMarketer based on the hourly, dailyand/or weekly estimates of each research firmSource: various, as noted, 2002 & 2003; eMarketer calculations, June 2003



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All those averages don’t get at one fact: The more experience people havewith the Internet (in terms of tenure), the more time they spend online.

For more about the cross-media advertising audience, see part one ofthis three-part series of reports, eMarketer’s “Online AdvertisingEssentials” at:http://www.emarketer.com/products/report.php?advert_on_ess_jun03

Average Number of Hours Spent Online per Week byInternet Users in the US, by Experience Online, 2002

<1 year 5.5

1 to <2 years 6.7

2 to <4 years 9.2

4 to <6 years 10.9

6+ years 15.8

Source: UCLA Center for Communication Policy, February 2003


http://www.emarketer.com/products/report.php?advert_on_ess_jun03

V

Methodology 7






A. Internet Ad Spending: Worldwide & Regional 180

B. Total Ad Spending: Worldwide & Regional 186

C. Canada 192

D. Europe 198

E. Asia-Pacific 224

F. Latin America 234

Index of Charts 237


177



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The adage that advertising follows eyeballs is true, but the corollary is thatin an industry as traditional as advertising, it takes a while to follow wherethe eyes are turning. And data from all over the world shows that whetherat home or at work, more people are spending more time on the Internet.

In 2003, there will be 633.6 million Internet users worldwide, accordingto eMarketer. Comparative estimates indicate that by mid decade, nearlyone billion people will be going online across the globe.

“The message is clear: online advertising works, andits cheap. This is different from the message thatonline advertising has to increase because thereare many millions of ‘eyeballs’ on the Web, andadvertisers will follow the eyeballs. The latterstatement was not inaccurate but it needed theformer, as a proof and the incentive, to actuallygenerate orders from traditional advertisers.”— Safa Rashtchy, senior research analyst, US Bancorp Piper Jaffray; The Silk

Road Weekly, 14 April 2003

Comparative Estimates: At-Home and At-WorkInternet Users Worldwide, 2000-2006 (in millions)

Computer Economics, June2002 (1)

Computer Industry Almanac(CIA), December 2002

comScore Networks Inc.,May 2002

eMarketer, May 2002

IDATE, January 2003

International DataCorpo-ration (IDC), November2002

Morgan Stanley, May 2002

Pioneer Consulting,January 2002

2000

–

–

–

384.8

–

–

348.0

344.6

2001

–

540.0

–

498.6

474.3

–

457.0

460.3

2002

562.3

665.9

323.1

565.7

590.0

–

571.0

–

2003

665.4

–

–

633.6

–

–

695.0

–

2004

752.6

–

–

724.9

–

–

813.0

–

2005

830.3

1,000.0

–

–

–

941.0

932.0

–

2006

921.4

–

–

–

948.7

–

–

–

Note: (1) Internet users are defined as individuals who consistently use theInternet with access from either work, school, home or multiple locationsSource: eMarketer, May 2002; various, as noted, 2002



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And the average Internet user spends anywhere from 9.0 hours per weekonline, as in Germany, to 10.8 hours per week, as in Brazil, up to nearly 14hours per week, as in Canada. This recent data from AOL and RoperASW isjust for select countries; the weekly usage will vary, of course, in nationsnot listed. And the numbers might be a little high, given that eMarketer’sestimate of hours online per week is 7.6.

But as a pointer to where the eyeballs spend time, it indicates whereadvertisers might find a receptive audience.

Time Spent Online by Consumers at Home and Workin Select Countries Worldwide, 2002 (in average hoursper week)

Canada 13.9

US 13.5

France 12.7

Brazil 10.8

UK 10.6

Germany 9.0

Source: America Online/RoperASW, April 2003



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A. Internet Ad Spending:Worldwide & RegionalAccording to two researchers, GartnerG2 and PricewaterhouseCoopers,worldwide Internet ad spending in 2003 will surpass $10 billion. That thefigures from Initiative Media are about half as that from the other firms,even after adjusted for the fact that it counts only about 80% of the market,is a mystery, since the New York-based media services company doesn’texplain its methodology.

Nevertheless, worldwide online ad spending by 2005 is expected to reachnearly $13 billion (PwC) or more than $15 billion (GartnerG2).

The comparative growth rates for global online ad spending divergesignificantly, with GartnerG2 pegging it in the double figures for all the yearsshown while, from 2003 on, PwC puts the growth in the high single figures.

In either case, both researchers describe healthy growth for this stillemerging global ad medium.

Comparative Estimates: Worldwide OnlineAdvertising Spending, 2000-2006 (in billions)


Initiative Media*, March2003

PricewaterhouseCoopers,May 2002

2000

–

–

$10.08

2001

$7.91

–

$9.60

2002

$9.66

$5.16

$9.65

2003

$11.54

$5.37

$10.54

2004

$13.52

–

$11.49

2005

$15.48

–

$12.54

2006

–

–

$13.66

Note: *initial figures based on 40 markets, accounting for around 80% oftotal global online ad spending, therefore figures above extrapolated for100% of marketSource: various, as noted, 2002 & 2003


Comparative Estimates: Worldwide OnlineAdvertising Spending Growth, 2001-2006 (in billions)


Initiative Media*, March 2003


2001

–

–

-4.7%

2002

22.1%

–

2.6%

2003

19.5%

4.1%

7.0%

2004

17.2%

–

9.0%

2005

14.5%

–

9.1%

2006

–

–

8.9%

Source: various, as noted, June 2003



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Estimates from Havas and the London Business School show interactivemarketing spending in general growing by 11.7% this year. However, thesefigures are not truly global, covering only the US, Germany, the UK,France, and Japan.

When worldwide online ad spending is viewed by region, the dominance ofthe US market becomes obvious. That more money is spent in the Asia-Pacific region than in Europe, even though the latter has stronger nationaleconomies, is due to the sheer size of the Asia-Pacific contingent and agreater number of Internet users.

Interactive Marketing Spending in Select Countries*,2002 & 2003 (as a % increase vs. prior year)

2002 6.6%

2003 11.7%

Note: n=645 chief marketing officers; interactive marketing defined asInternet advertising, marketing Web sites and extranets, e-mail marketingand new media (e.g., digital TV, wireless); *US, Germany, UK, France andJapanSource: London Business School/Havas, December 2003


Worldwide Online Advertising Spending, by Region,2000-2006 (in millions)

US

Asia-Pacific

Western Europe

Latin America

Canada

Eastern Europe

Middle East/Africa

Worldwide

2000

$8,225

$681

$904

$123

$73

$48

$26

$10,080

2001

$7,530

$804

$957

$150

$94

$48

$21

$9,604

2002

$7,600

$924

$984

$160

$105

$55

$26

$9,854

2003

$8,000

$1,076

$1,074

$175

$120

$63

$33

$10,541

2004

$8,600

$1,279

$1,158

$200

$137

$75

$40

$11,489

2005

$9,300

$1,470

$1,229

$250

$155

$86

$47

$12,537

2006

$10,100

$1,631

$1,299

$300

$175

$99

$53

$13,657

Note: ranked by 2003 spending figuresSource: PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002



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“It’s a distributed system. You put tools out thereand see what happens. You accept that things aregoing to be messy and somewhat unpredictable.”— Tim Berners-Lee, creator of the World Wide Web; The New York Times, 11

May 2003

While PwC and Wilkofsky Gruen Associates see all regions increasing theironline ad spending from 2002 onward, the sharpest run-ups—relative to theworldwide growth figures—will be found in the Asia-Pacific regions,Canada, Eastern Europe, and the Middle East/Africa region. The latter twohave much room to grow, starting from such small spending figures.

Worldwide Online Advertising Spending, by Region,2000-2006 (as a share of worldwide spending)

2000 2001 2002 2003 2004 2005 2006

Asia-Pacific 6.8% 8.4% 9.4% 10.2% 11.1% 11.7% 11.9%

Canada 0.7% 1.0% 1.1% 1.1% 1.2% 1.2% 1.3%

Eastern Europe 0.5% 0.5% 0.6% 0.6% 0.7% 0.7% 0.7%

Latin America 1.2% 1.6% 1.6% 1.7% 1.7% 2.0% 2.2%

Middle East/Africa 0.3% 0.2% 0.3% 0.3% 0.3% 0.4% 0.4%

US 81.6% 78.4% 77.1% 75.9% 74.9% 74.2% 74.0%



Worldwide Online Advertising Spending, by Region,2001-2006 (as a % increase/decrease vs. prior year)

2001 2002 2003 2004 2005 2006

Asia-Pacific 18.1% 14.9% 16.5% 18.9% 14.9% 11.0%

Canada 26.8% 11.7% 14.3% 14.2% 13.1% 12.9%

Eastern Europe 0.0% 14.6% 14.5% 19.0% 14.7% 15.1%

Latin America 22.0% 6.7% 9.4% 14.3% 25.0% 20.0%

Middle East/Africa -19.2% 23.8% 26.9% 21.2% 17.5% 12.8%

US -8.4% 0.9% 5.3% 7.5% 8.1% 8.6%

Worldwide -4.7% 2.6% 7.0% 9.0% 9.1% 8.9%




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While companies in the US spend the most ad dollars per Internet user,other nations with lively online ad markets include Switzerland, Australia,Sweden, and Norway—all well-wired nations.

Online Advertising Spending per Internet User, byNation, 2000-2006 (ranked by 2003 spending)

2000 2001 2002 2003 2004 2005 2006

US $66.33 $50.49 $41.23 $41.36 $41.17 – –

Switzerland $9.13 $21.85 $19.38 $19.14 $20.27 $20.26 $20.24

Australia $6.97 $10.47 $13.85 $17.42 $20.29 $22.22 $24.32

Sweden $23.14 $15.82 $15.00 $14.62 $14.93 $15.22 $15.71

Norway $13.08 $13.33 $11.88 $11.76 $12.00 $12.22 $11.89

Japan $11.63 $10.50 $10.61 $11.27 $12.84 $14.16 $15.00

Canada $6.13 $7.52 $7.95 $8.57 $9.13 $9.69 $10.29

United Kingdom $7.99 $9.32 $8.60 $8.21 $8.62 $9.15 $9.83

France $13.68 $10.05 $8.18 $7.92 $7.69 $7.78 $7.86

Germany $6.32 $5.39 $5.42 $6.15 $6.25 $6.21 $6.17

Finland $3.91 $5.17 $5.48 $5.76 $5.43 $5.83 $6.22

Portugal $11.43 $5.60 $5.33 $5.14 $5.13 $4.89 $4.80

Spain $7.90 $5.50 $5.00 $5.00 $4.73 $4.67 $4.62

Italy $5.34 $4.90 $4.84 $4.85 $4.86 $4.86 $4.87

Netherlands $4.33 $4.25 $4.00 $4.21 $4.40 $4.66 $4.76

Hong Kong $5.38 $4.24 $4.17 $4.00 $4.19 $4.44 $4.68

Taiwan $4.44 $3.38 $3.33 $3.30 $3.27 $3.33 $3.46

China $1.47 $1.47 $1.40 $1.29 $1.22 $1.18 $1.15

Russia $1.38 $1.07 $0.83 $0.68 $0.70 $0.71 $0.73

Note: US figures from eMarketer; Canada figures from Statistics Canada,PricewaterhouseCoopers, Wilkofsky Gruen Associates; Europe figures fromZenith Media, PricewaterhouseCoopers, Wilkofsky Gruen Associates;Asia-Pacific figures from NUA, IDC, PricewaterhouseCoopers, WilkofskyGruen AssociatesSource: eMarketer, February 2003; Zenith Media, NUA, IDC,PricewaterhouseCoopers, Wilkofsky Gruen Associates, May 2002



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According to Havas and the London Business School, 2003 will seesignificantly increased interactive marketing expenditures in the UK,France, and the US.

Interactive Marketing Spending in Select Countries,2002 & 2003 (as a % increase/decrease vs. prior year)

US

11.3%

12.7%

Germany

-2.2%

1.5%

UK

19.7%

23.3%

France

-2.3%

14.2%

Japan

-0.6%

7.4%

Total

6.6%

11.7%

2002 2003

Note: n=645 chief marketing officers; interactive marketing defined asInternet advertising, marketing Web sites and extranets, e-mail marketingand new media (e.g., digital TV, wireless)Source: London Business School/Havas, December 2002



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Within the five major nations studied by the Paris-based ad agency and theLondon B-School, the industry sectors poised to increase their interactivemarketing most in 2003 are travel and transport, media entertainment,consumer durables, and luxury or fashion products.

Interactive Marketing Spending in Select Countries*,by Industry Sectors, 2002 & 2003 (as a %increase/decrease vs. prior year)

2002 2003

Automotive 14.0% 14.8%

Business/industrial services -0.7% -6.5%

Consumer electronics -14.7% 5.0%

Consumer packaged goods 7.4% 13.8%

Retail financial services -0.5% 15.9%

Hotels/tourism/leisure 6.2% 14.4%

Luxury/fashion products 23.5% 16.4%

Media entertainment/culture 6.1% 19.3%

OTC pharmaceuticals -6.1% 0.8%

Other consumer durables -1.0% 17.3%

Other electronic products/systems 18.9% 13.6%

Other industrial products/systems -1.0% 8.9%

Retail/mail order 18.1% 3.9%

Telecom products/services -10.6% 9.4%

Travel/transport 4.4% 23.4%

Other (including utilities) 16.6% 8.6%

Note: n=645 chief marketing officers; interactive marketing defined asInternet advertising, marketing Web sites and extranets, e-mail marketing,and new media (e.g., digital TV, wireless); *US, Germany, UK, France, JapanSource: London Business School/Havas, December 2002



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B.Total Ad Spending:Worldwide & RegionalWhile three of the four research firms put worldwide advertising spendingin all media at about $330 billion in 2003, Universal McCann projects amuch higher figure of $469.80 billion.

However, global growth rates for 2003 fall more in line, ranging fromZenith’s 1.5% to Universal’s 4.3%. More important, after spending declinesor flat growth in 2001 and 2002, all four forecasts see strong growthglobally ahead.

Comparative Estimates: Worldwide AdvertisingSpending, 2000-2006 (in billions)

Initiative Media,March 2003*

Pricewaterhouse-Coopers, May2002


Zenith Optimedia,December 2002**

2000

–

$336.64

$474.30

–

2001

–

$320.40

$440.90

$328.64

2002

$313.50

$324.20

$450.50

$325.99

2003

$327.50

$334.89

$469.80

$330.94

2004

–

$356.36

–

$343.43

2005

–

$377.35

–

$354.63

2006

–

$403.77

–

–

Note: *given 2003 figure of $262.0 billion represents "around 80% of totalglobal spend"; **April 2003 estimates only for seven largest ad markets"which together account for 73% of the world's advertising expenditure,"rest of figures shown extrapolate missing 27%Source: various, as noted, 2002 & 2003


Comparative Estimates: Worldwide AdvertisingSpending Growth, 2001-2006 (as a %increase/decrease vs. prior year)

2001 2002 2003 2004 2005 206

Initiative Media, March 2003 -4.2% 0.9% 4.5% – – –

PricewaterhouseCoopers, May 2002 -4.8% 1.2% 3.3% 6.4% 5.9% 7.0%

Universal McCann, June 2003 -7.0% 2.2% 4.3% – – –

Zenith Optimedia, December 2002 – -0.8% 1.5% 3.8% 3.3% –




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The regional comparisons for total advertising spending from PwC showthe order as expected. That is, the most spending in the US, followed by theEurope/Middle East/Africa regions (not broken out separately), the Asia-Pacific region, Latin America, and Canada.

The spending shares by region will show little change during the six yearscharted below.

Advertising Spending Worldwide, by Region,2001-2006 (in billions)

US

Europe/MiddleEast/Africa

Asia-Pacific

Latin America

Canada

Total

2001

$148.80

$81.66

$70.28

$14.79

$5.68

$320.40

2002

$150.38

$82.27

$70.79

$14.94

$5.83

$324.20

2003

$154.96

$85.38

$72.87

$15.57

$6.12

$334.89

2004

$166.29

$90.39

$76.61

$16.50

$6.58

$356.36

2005

$175.13

$96.15

$81.27

$17.73

$7.08

$377.35

2006

$186.47

$103.35

$87.00

$19.34

$7.62

$403.77

Note: numbers may not add up to total due to roundingSource: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, May2002


Advertising Spending Worldwide, by Region,2001-2006 (as a % of total spending and in billions)

US

Europe/MiddleEast/Africa

Asia-Pacific

Latin America

Canada

Total spending(in billions)

2001

46.4%

25.5%

21.9%

4.6%

1.8%

$320.40

2002

46.4%

25.4%

21.8%

4.6%

1.8%

$324.20

2003

46.3%

25.5%

21.8%

4.6%

1.8%

$334.89

2004

46.7%

25.4%

21.5%

4.6%

1.8%

$356.36

2005

46.4%

25.5%

21.5%

4.7%

1.9%

$377.35

2006

46.2%

25.6%

21.5%

4.8%

1.9%

$403.77

Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, May2002



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The growth rates for ad spending paint a different picture, however. In2003, spending in Europe/Middle East/Africa regions, Latin America, andCanada will all grow more quickly than the global rate of 3.3%.

And in the three years following, ad spending in all regions is expected to grow at rates of 5.1% or more—healthy growth by nearlyanyone’s standards.

Advertising Spending Growth Worldwide, by Region,2001-2006 (as a % increase/decrease vs. prior year)

2001 2002 2003 2004 2005 2006

US -7.7% 1.1% 3.0% 7.3% 5.3% 6.5%

Europe/Middle East/Africa -1.4% 0.7% 3.8% 5.9% 6.4% 7.5%

Asia-Pacific -0.8% 0.7% 2.9% 5.1% 6.1% 7.0%

Latin America -8.7% 1.1% 4.2% 6.0% 7.4% 9.1%

Canada 2.9% 2.6% 5.0% 7.6% 7.5% 7.7%

Total -4.8% 1.2% 3.3% 6.4% 5.9% 7.0%




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Regional MarketingA survey in December 2002 of 645 chief marketing officers in the US,Germany, the UK, France, and Japan found that they intend to increasemarketing expenditures in 2003 by 3.3% overall. The categories set toreceive greater than average spending increases include media advertising(at 3.6%), direct mail (at 3.5%), and interactive marketing (at 11.7%).

Total Marketing Spending in Select Countries*, byCategory, 2002 & 2003 (as a % increase/decrease vs.prior year)

2002 2003

Media advertising -2.0% 3.6%

Sales promotion 0.8% 0.6%

Direct mail 3.8% 3.5%

PR/sponsorship 1.8% 2.2%

Interactive marketing 6.6% 11.7%

Total (including other) 0.6% 3.3%

Note: n=645 chief marketing officers; *US, Germany, UK, France, JapanSource: London Business School/Havas, December 2002



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When the Havas and the London Business School report entitled“Marketing Expenditure Trends 2002” looked at the allocation of marketingexpenditures by nation in 2001, it found the following:

■ The UK and Japan allocate more to media advertising than the averagetotal of 45.4% of budget.

■ Sales promotion is greater than the 19.8% allocation average inGermany and France.

■ The US and the UK are more invested in direct mail than the five-nation average of 12.8%.

■ Spending on public relations and sponsorship is greater than the 12.7%allocation average in both the US and Germany.

■ With an average budget share of 6.1% going into interactivemarketing, that figure is surpassed in the US, Germany, and Japan.

The average spending allocations in the five nations will remain relativelystable during the 2001 to 2003 period. However, the share devoted to mediaadvertising is expected to drop by one point, while interactive marketing’sshare should increase by nearly one point.

Marketing Spending Allocation in Select Countries, byCategory, 2001

US Germany UK France Japan Total

Media advertising 42.9% 41.4% 51.3% 42.1% 50.8% 45.4%

Sales promotion 19.4% 23.4% 13.0% 26.4% 18.3% 19.8%

Direct mail 14.6% 10.8% 17.2% 12.0% 7.9% 12.8%

PR/sponsorship 13.0% 16.2% 10.4% 11.6% 12.5% 12.7%

Interactive marketing 7.5% 6.4% 4.4% 3.4% 7.2% 6.1%

Other 2.6% 1.8% 3.7% 4.5% 3.3% 3.1%



Marketing Spending Allocation in Select Countries*,2002 & 2003 (as a % increase/decrease vs. prior year)

2001 2002 2003

Media advertising 45.4% 44.2% 44.4%

Sales promotion 19.8% 19.9% 19.4%

Direct mail 12.8% 13.3% 13.3%

PR/sponsorship 12.7% 12.9% 12.8%

Interactive marketing 6.1% 6.5% 7.0%

Other 3.1% 3.2% 3.2%

Note: n=645 chief marketing officers; *US, Germany, UK, France, JapanSource: London Business School/Havas, December 2002



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The industry sectors that Havas and the London Business School project toget the greatest overall marketing spending increases in 2003 are otherelectronic products/systems (at 11.2%), automotive (at 8.0%), retailfinancial services (at 7.3%), and telecom products and services (at 6.9%).

Total Marketing Spending in Select Countries*, byIndustry Sectors, 2002 & 2003 (as a %increase/decrease vs. prior year)

2002 2003

Automotive -0.1% 8.0%

Business/industrial services -5.0% -5.0%

Consumer electronics -12.4% 3.9%

Consumer packaged goods 3.0% 5.4%

Retail financial services 3.0% 7.3%

Hotels/tourism/leisure 3.7% 3.7%

Luxury/fashion products 10.3% 1.7%

Media entertainment/culture -0.3% 0.0%

OTC pharmaceuticals -2.0% -0.6%

Other consumer durables -3.3% 6.3%

Other electronic products/systems 4.7% 11.2%

Other industrial products/systems 2.7% 0.2%

Retail/mail order 3.9% -2.0%

Telecom products/services -16.8% 6.9%

Travel/transport -2.8% 2.2%

Other (including utilities) -0.7% 2.1%

Note: n=645 chief marketing officers; *US, Germany, UK, France, JapanSource: London Business School/Havas



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C. CanadaWith 17.8 million Internet users in 2003, according to eMarketer, and atotal population of 32.2 million, according to the US Census Bureau, theonline penetration rate in Canada is a strong 55.3% (practically the same asthe 55.8% rate in the US).

Alongside that strong penetration rate for online usage in general isincreasing adoption of broadband access, which eMarketer expects to bemore than half of Canadian households by the end of this year.

Comparative Estimates: At-Home and At-WorkInternet Users in Canada, 2000-2006 (in millions)

Computer Industry Almanac(CIA), December 2002

comScore Networks Inc.,October 2002

eMarketer, September 2002

International Data Corporation(IDC), April 2002


PricewaterhouseCoopers(PwC)/Wilkofsky GruenAssociates, May 2002

2000

–

–

12.7

–

9.7

–

2001

–

–

13.5

18.8

13.0

12.5

2002

17.8

15.9

14.9

–

–

13.2

2003

–

–

17.8

–

–

14.0

2004

–

–

21.4

–

–

15.0

2005

–

–

–

–

–

16.0

2006

–

–

–

25.2

–

17.0

Source: eMarketer, September 2002; various, as noted, 2002


Online Households in Canada: Dial-Up vs. Broadband,2001 & 2002 (as a % of online households)

2001

58.0% 42.0%

2002

50.4% 49.6%

Dial-up* Broadband

Note: *includes ISDNSource: eMarketer, March 2003



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According to PricewaterhouseCoopers and Wilkofsky Gruen Associates,companies will spend $120 million for online advertising this year, risingto $175 million by 2006.

Starting from a relatively small base, but with such an active Internetpopulation, means tremendous growth rates for online ad spending—in thedouble digits for all six years shown.

Online Advertising Spending in Canada, 2000-2006 (inmillions)

2000 $73

2001 $94

2002 $105

2003 $120

2004 $137

2005 $155

2006 $175



Online Advertising Spending Growth in Canada,2001-2006 (as a % increase vs. prior year)

2001 28.8%

2002 11.7%

2003 14.3%

2004 14.2%

2005 13.1%

2006 12.9%




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Total Media Spending: CanadaIn the IAB Canada report entitled “Advertiser’s Executive Survey 2002,”141 marketers in that nation were asked about ad budget increases bymedia in 2002. While 23% mentioned the Internet (but note that 43% of therespondents were online advertisers), TV and direct mail were also cited by20% and 17%, respectively.

Average Ad Budget Increase among CanadianCompanies, by Media, 2002 (as a % of respondents)

Online 23%

TV 20%

Direct mail 17%

Magazine 13%

Other 11%

Newspaper 10%

Radio 8%

Note: n=141Source: Internet Advertising Bureau of Canada, June 2002



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When comparing ad budget increases among media in 2002, online, TV,and direct mail got the largest boosts, while the two main print media—magazines and newspapers—had the most mentions of spending decreases.

Change in Ad Budgets among Canadian Companies,by Media, 2002 (as a % of respondents)

Online

32%

9%

TV

26%

6%

Direct mail

24%

7%

Magazine

23%

10%

Newspaper

20%

10%

Radio

17%

9%

Other

17%

6%

Budget increase Budget decrease

Source: Internet Advertising Bureau of Canada, June 2002



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The two comparative estimates for total media spending in 2003 lie in aclose range: $6.12 billion from PwC and $5.52 billion from Zenith.

Comparative Estimates: Advertising Spending inCanada, 2000-2006 (in billions)

2000

$5.52

2001

$5.68

$5.10

2002

$5.83

$5.31

2003

$6.12

$5.52

2004

$6.58

$5.69

2005

$7.08

$5.82

2006

$7.62

PricewaterhouseCoopers (PwC)/Wilkofsky Gruen AssociatesMay 2002

Zenith Optimedia,December 2002

Source: PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May2002; Zenith Optimedia, December 2002



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However, PwC expects sharper growth rates this year and through middecade than does Zenith.

Comparative Estimates: Advertising Spending inCanada, 2000-2006 (as a % increase vs. prior year)

2001

2.9%

2002

2.6%

4.1%

2003

5.0%

3.9%

2004

7.6%

3.0%

2005

7.5%

2.3%

2006

7.7%






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D. EuropeAll three firms with estimates of Internet users in Europe for 2003 see thesize of the audience as being between 195.5 million and 199.0 million, witheMarketer’s figure of 196.2 million in the middle.

With a market of Internet users that’s larger than the US and Canadacombined, the upside for Internet ad spending is potentially even larger.What’s holding that back is a combination of tradition and generallyweaker economies than in North America.

Nevertheless, combined online spending figures fromPricewaterhouseCoopers, Wilkofsky Gruen, and Zenith show 2003’s totalEuropean spending at $1.14 billion, with expectations of a reasonable butnot spectacular rise to $1.40 billion by 2006.

Comparative Estimates: At-Home and At-WorkInternet Users in Europe, 2000-2006 (in millions)


Computer IndustryAlmanac (CIA), March 2002

eMarketer, May 2002


2000

–

–

108.3

87.0

2001

–

115.0

144.4

121.0

2002

163.5

–

175.7

158.0

2003

195.5

–

196.2

199.0

2004

224.8

357.0

221.1

234.0

2005

240.6

–

–

269.0

2006

257.4

–

–

–

Note: (1) Internet users are defined as individuals who consistently use theInternet with access from either work, school, home or multiple locationsSource: eMarketer, May 2002; various, as noted, 2002



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The largest spending in 2003 occurs in the largest nations: the UK at $230million, France at $190 million, and Germany at $160. But size fails toequate exactly with online ad spending, since Germany is larger than theother two nations. An active Internet population does equate, however;which is why 2003’s online ad spending in Sweden, at $95 million, outstripslarger nations such as Italy (at $80 million) and Spain (at $50 million).

Online Advertising Spending in Europe, by Country,2000-2006 (in millions)

200 2001 2002 2003 2004 2005 2006

Austria $17 $19 $20 $22 $25 $27 $29

Belgium $12 $17 $20 $23 $27 $31 $33

Denmark $16 $20 $20 $19 $21 $23 $24

Finland $9 $15 $17 $19 $19 $21 $23

France $197 $191 $180 $190 $200 $210 $220

Germany $141 $124 $130 $160 $175 $180 $185

Greece $17 $14 $16 $17 $18 $18 $19

Ireland $1 $3 $4 $4 $5 $5 $5

Italy $71 $71 $75 $80 $85 $90 $95

Netherlands $26 $34 $36 $40 $44 $48 $50

Norway $34 $40 $38 $40 $42 $44 $44

Portugal $16 $14 $16 $18 $20 $22 $24

Spain $49 $44 $45 $50 $52 $56 $60

Sweden $118 $87 $90 $95 $100 $105 $110

Switzerland $21 $59 $62 $67 $75 $79 $83

UK $159 $205 $215 $230 $250 $270 $295

Western EuropeSubtotal

$904 $957 $984 $1,074 $1,158 $1,229 $1,299

Czech Republic $3 $5 $7 $8 $8 $9 $10

Hungary $7 $6 $7 $8 $10 $11 $12

Poland $18 $17 $19 $21 $24 $26 $29

Romania $7 $5 $7 $9 $12 $15 $19

Russia $13 $15 $15 $17 $21 $25 $29

Eastern EuropeSubtotal

$48 $48 $55 $63 $75 $86 $99

Europe total $952 $1,005 $1,039 $1,137 $1,233 $1,315 $1,398

Source: Zenith Media, PricewaterhouseCoopers, Wilkofsky GruenAssociates, May 2002



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The larger nations that surpass 2003’s notable spending growth rate of9.4% across Europe include Germany (at 23.1%), Spain (at 11.1%), andRussia (at 13.3%). In general, building from a much smaller base, online adspending will grow more quickly in Eastern Europe than in the west.

Online Advertising Spending Growth in Europe, byCountry, 2001-2006

2001 2002 2003 2004 2005 2006

Austria 11.8% 5.3% 10.0% 13.6% 8.0% 7.4%

Belgium 41.7% 17.6% 15.0% 17.4% 14.8% 6.5%

Denmark 25.0% 0.0% -5.0% 10.5% 9.5% 4.3%

Finland 66.7% 13.3% 11.8% 0.0% 10.5% 9.5%

France -3.0% -5.8% 5.6% 5.3% 5.0% 4.8%

Germany -12.1% 4.8% 23.1% 9.4% 2.9% 2.8%

Greece -17.6% 14.3% 6.3% 5.9% 0.0% 5.6%

Ireland 200.0% 33.3% 0.0% 25.0% 0.0% 0.0%

Italy 0.0% 5.6% 6.7% 6.3% 5.9% 5.6%

Netherlands 30.8% 5.9% 11.1% 10.0% 9.1% 4.2%

Norway 17.6% -5.0% 5.3% 5.0% 4.8% 0.0%

Portugal -12.5% 14.3% 12.5% 11.1% 10.0% 9.1%

Spain -10.2% 2.3% 11.1% 4.0% 7.7% 7.1%

Sweden -26.3% 3.4% 5.6% 5.3% 5.0% 4.8%

Switzerland 181.0% 5.1% 8.1% 11.9% 5.3% 5.1%

UK 28.9% 4.9% 7.0% 8.7% 8.0% 9.3%

Western Europe Subtotal 5.9% 2.8% 9.1% 7.8% 6.1% 5.7%

Czech Republic 66.7% 40.0% 14.3% 0.0% 12.5% 11.1%

Hungary -14.3% 16.7% 14.3% 25.0% 10.0% 9.1%

Poland -5.6% 11.8% 10.5% 14.3% 8.3% 11.5%

Romania -28.6% 40.0% 28.6% 33.3% 25.0% 26.7%

Russia 15.4% 0.0% 13.3% 23.5% 19.0% 16.0%

Eastern Europe Subtotal 0.0% 14.6% 14.5% 19.0% 14.7% 15.1%

Europe total 5.6% 3.4% 9.4% 8.4% 6.7% 6.3%

Source: Zenith Media, PricewaterhouseCoopers, Wilkofsky GruenAssociates, May 2002



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Even with such robust growth rates, the Internet’s share of Europe’s totaladvertising spending will hover at 1.4% from 2003 through 2006.

Internet's Share of Total Advertising Spending inEurope, 2000-2006 (in billions)

2000 2001 2002 2003 2004 2005 2006

Internet $0.98 $1.03 $1.07 $1.17 $1.27 $1.36 $1.45

Total $82.79 $81.66 $82.27 $85.38 $90.39 $96.15 $103.35

Share 1.2% 1.3% 1.3% 1.4% 1.4% 1.4% 1.4%




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Total Media Spending: EuropeIn fact, total ad spending in Europe is far less than in the US, no matterwhat the media. In 2003, for example, either comparative estimate below isfar less than the $248 billion eMarketer estimate for the US. Again, it’s acombination of tradition (less marketing focus than in the States) andweaker economies that reduce spending.

Comparative Estimates: Advertising Spending inEurope, 2000-2006 (in billions)

2000

$82.79

2001

$81.66

$72.91

2002

$82.27

$72.11

2003

$85.38

$73.89

2004

$90.39

$77.28

2005

$96.15

$80.82

2006

$103.35

PricewaterhouseCoopers (PwC)/Wilkofsky Gruen AssociatesMay 2002*


Note: *region includes Europe, Middle East, AfricaSource: PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May2002; Zenith Optimedia, December 2002



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That said, both PwC and Zenith project growth rates for total mediaspending both this year and through 2006.

According to Zenith, the most active advertising markets are in Germanyand the UK, where spending in 2003 should hit $19.15 billion and $16.07billion, respectively.

Comparative Estimates: Advertising Spending inEurope, 2001-2006 (as a % increase/decrease vs. prioryear)

-1.4%

0.7%

-1.1%

3.8%

2.5%

5.9%

4.6%

6.4%

4.6%

2006

2005

2004

2003

2002

2001



Note: *region includes Europe, Middle East and AfricaSource: PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates, May2002; Zenith Optimedia, December 2002


Advertising Spending in Select Countries in Europe,2001-2005 (in millions)

2001 2002 2003 2004 2005

France $10,532 $10,281 $10,416 $10,707 $11,027

Germany $20,146 $19,323 $19,147 $19,819 $20,910

Italy $8,349 $8,053 $8,098 $8,337 $8,634

Spain $5,710 $5,787 $5,828 $6,062 $6,339

UK $15,888 $15,889 $16,067 $16,538 $17,074

5 country total $60,624 $59,333 $59,556 $61,463 $63,984

Note: includes newspapers, magazines, television, radio, cinema, outdoorand Internet spendingSource: Zenith Optimedia, April 2003



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Viewed by growth rates, however, and overall economic woes in Germanyare expected to deliver an ad spending downturn of 0.9% this year—theonly negative growth in the five largest European nations. In a slowadvertising market, the greatest increase is seen for France, at 1.3%.

Zenith expects a spending recovery next year, and by 2005 the 5.5%increase in Germany will be greater than in the other four nations.

Advertising Spending Growth in Select Countries inEurope, 2002-2005 (as a % increase/decrease vs. prioryear)

2002 2003 2004 2005

France -2.4% 1.3% 2.8% 3.0%

Germany -4.1% -0.9% 3.5% 5.5%

Italy -3.5% 0.6% 3.0% 3.6%

Spain 1.4% 0.7% 4.0% 4.6%

UK 0.0% 1.1% 2.9% 3.2%

5 country total -2.1% 0.4% 3.2% 4.1%




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United KingdomInternet ad spending figures from PwC and Wilkofsky Gruen suggest thatthe years of two-digit gains were earlier in the decade—although the 7.0%growth prediction for this year still represents a considerable increase.

Translated to absolute dollars, spending for online advertising in the UKappears a bit less considerable, with a 2003 estimate of $230 million, risingto $295 million by 2006.

“With Internet penetration in the United Kingdom set to pass 50% soon,advertisers there will begin to adopt it as a viable advertising medium in2003,” according to I-level, a London-based ad agency. The agency predictsthat Internet ad spending this year will rise 46%,” as reported by the InternetAdvertising Report earlier this year—far above the PwC figure of 7.0%.

Online Advertising Spending Growth in the UK,2001-2006 (as a % increase vs. prior year)

2001 28.9%

2002 4.9%

2003 7.0%

2004 8.7%

2005 8.0%

2006 9.3%



Online Advertising Spending in the UK, 2000-2006 (inmillions)

2000 $159

2001 $205

2002 $215

2003 $230

2004 $250

2005 $270

2006 $295




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As a standalone prediction, that growth figure from I-level might seemoutrageously large, if not for the even larger 2003 online ad spendinggrowth estimate of 47.9% from Initiative Media. The New York-basedmedia firm also sees increased spending in the UK for other ad media, suchas 7.5% for the cinema and 3.8% for television.

While not quite as optimistic, a study released in December 2002 by theLondon Business School and Paris-based communications firm Havaspredicted UK online marketing spending would rise by more than 23% in2003 after a nearly 20% gain the year before.

That large growth for online ad spending contrasts with an overallmarketing spending increase of 5.3% in 2003.

Advertising Spending Growth in the UK, by Media,2003 (as a % increase vs. prior year)

Internet 47.9%

Cinema 7.5%

Outdoor 5.4%

TV 3.8%

Press* 3.5%

Radio 2.9%

Note: *includes newspapers and magazinesSource: Initiative Media, March 2003


Interactive Marketing Spending in the UK, 2002 &2003 (as a % increase vs. prior year)

2002 19.7%

2003 23.3%



Total Marketing Spending in the UK, 2002 & 2003 (as a% increase vs. prior year)

2002 4.2%

2003 5.3%




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In line with the jump in spending is a shift in marketing budget allocations.In 2003, the share of spending for interactive marketing is expected to riseby 0.9%, according to Havas and the London B-School, balanced by a 0.7%decrease in the spending allocation for sales promotions.

Marketing Spending Allocation in the UK, byCategory, 2002 & 2003 (as a % increase/decrease vs.prior year)

Media advertising

-2.4%

-0.2%

Sales promotion

-0.8%

-0.7%

Direct mail

1.5%

0.3%

PR/sponsorship

-1.0%

0.2%


0.7%

0.9%

2002 2003




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The World Advertising Research Center (WARC)—a UK-based marketingresearch company—said that in 2002, total advertising spending in the UKinched up by 0.8%. The media with the highest growth rates last year weredirect mail (at 6.7%) and television (at 4.3%). Meanwhile, spendingdownturns for business magazines (at –9.4%) and national newspapers (at–6.4%) helped keep the entire market flat.

Newspaper advertising, in particular, was hurt by the continuing softeconomy. Because of a slumping job market, recruitment ad spending fellby 7.6% in 2002.

Advertising Spending in the UK, by Medium, 2001 &2002 (in millions of £ and % change)

2001 % change 2002 % change

National newspapers* £2,063 -8.4% £1,930 -6.4%

Regional newspapers £2,834 2.6% £2,870 1.3%

Consumer magazines** £779 3.9% £785 0.8%

Business magazines £1,202 -5.4% £1,088 -9.4%

Television £3,525 -10.7% £3,677 4.3%

Radio £487 -9.1% £491 0.8%

Outdoor £678 -2.8% £690 1.9%

Direct mail £2,228 8.7% £2,378 6.7%

Total £13,794 -3.3% £13,908 0.8%

Note: *includes supplements; **excludes supplementsSource: World Advertising Research Center (WARC), March 2003


Advertising Spending in the UK, by Medium, Q22001-Q4 2002 (as a % increase/decrease vs. prior year)

Q22001

Q32001

Q42001

Q12002

Q22002

Q32002

Q42002

National newspapers* -11.8% -11.0% -18.1% -17.4% -6.5% -1.6% 3.1%

Regional newspapers 2.2% 1.3% 0.1% 0.7% -0.3% 2.0% 2.8%

Consumer magazines** 5.3% 4.5% -1.2% -2.1% -0.5% 1.9% 3.6%

Business magazines -5.9% -11.2% -11.1% -21.5% -5.6% -6.0% -5.0%

Television -15.9% -12.3% -12.3% -6.8% 5.4% 9.3% 9.8%

Radio -14.5% -7.8% -13.5% -0.7% 0.1% 0.7% 3.1%

Outdoor -5.8% -2.8% -12.9% -10.8% -2.1% 5.1% 15.5%

Direct mail 7.5% 6.0% 11.2% 5.8% 9.7% 8.6% 3.9%

Total -6.3% -5.1% -6.8% -6.0% 1.1% 3.6% 4.9%

Note: *includes supplements; **excludes supplementsSource: World Advertising Research Center (WARC), March 2003



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Newspaper advertising, in particular, was hurt by the continuing softeconomy. Because of a slumping job market, recruitment ad spending fellby 7.6% in 2002.

Newspaper Display and Classified AdvertisingSpending in the UK, 2001 & 2002 (in millions of £ and% increase/decrease vs. prior year)

2001 2002 % change

Total newspaper display* £2,487 £2,410 -3.1%

Total newspaper classified £2,409 £2,390 -0.8%

Recruitment £1,056 £976 -7.6%

Property £386 £391 1.4%

Motor £370 £380 2.6%

Other £598 £644 7.7%

Note: *includes supplementsSource: World Advertising Research Center (WARC), March 2003



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GermanyAccording to Nielsen Media, online advertising spending in Germany grewby 20.9% in 2002, increasing to €255.9 million. That put online adexpenditures at 1.5% of total advertising budgets.

The five major industry sectors advertising online last year were:■ Service companies, €53 million, up 87.3%■ Training and media, €39 million, up 26.8%■ Trade and logistics, €33 million, up 48.2%■ Financial services, €29.5 million, up 75.7%■ Telecommunications, €22.5 million, up 7.2%A highly different take on Internet ad spending in Germany comes from

Havas and the London Business School, which indicates that interactivemarketing expenditures in 2002 fell by 2.2%. but will rise by 1.5% in 2003.

Another perspective comes from PwC and Wilkofsky Gruen: Onlineadvertising did not soar by 20%-plus in 2002, as Nielsen reports, but willincrease at that level in 2003 after a 4.8% gain last year.

Interactive Marketing Spending in Germany, 2002 &2003 (as a % increase vs. prior year)

2002-2.2%

2003 1.5%



Online Advertising Spending Growth in Germany,2001-2006 (as a % increase/decrease vs. prior year)

2001-12.1%

2002 4.8%

2003 23.1%

2004 9.4%

2005 2.9%

2006 2.8%




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PwC’s spending figure of $130 million in 2002 also diverges greatly fromNielsen’s €255.9 million estimate. (To compare them equally, that $130million equals €111 million as of late June 2003.)

Not including the Internet, Initiative Media expects a down market for adsales in 2003, talking of negative growth rates for radio, TV, outdoor, and“press” ads (newspapers and magazines).

Online Advertising Spending in Germany, 2000-2006(in millions)

2000 $141

2001 $124

2002 $130

2003 $160

2004 $175

2005 $180

2006 $185



Advertising Spending Growth in Germany, by Media,2003 (as a % decrease vs. prior year)

Radio 0.6%

TV 1.8%

Outdoor-1.8%

Press*-3.1%




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The perspective from Havas and the London Business School is onlyslightly better, calling for a 1.3% increase in across-the-board marketingspending in Germany this year.

In a flat market, the only category with even a hint of gain in spendingallocation this year will be sales promotions, and that at only 0.6% up.

Total Marketing Spending in Germany, 2002 & 2003 (asa % increase/decrease vs. prior year)

2002-4.5%

2003 1.3%



Marketing Spending Allocation in Germany, byCategory, 2002 & 2003 (as a % increase/decrease vs.prior year)

Media advertising

-2.5%

-0.2%

Sales promotion

0.1%

0.6%

Direct mail

0.4%

-0.2%

PR/sponsorship

1.8%

-0.6%


0.2%

0.0%

2002 2003




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FranceOnline spending estimates from PwC and Wilkofsky Gruen point to a direct bounceback this year in France, with a 5.6% gain offsetting lastyear’s 5.8% loss.

If true, that would bring 2003’s spending to $190 million, about the sameas in 2001. With steady gains, online ad spending in France should reach$220 million by 2006.

Online Advertising Spending Growth in France,2001-2006 (as a % increase/decrease vs. prior year)

2001-3.0%

2002-5.8%

2003 5.6%

2004 5.3%

2005 5.0%

2006 4.8%



Online Advertising Spending in France, 2000-2006 (inmillions)

2000 $197

2001 $191

2002 $180

2003 $190

2004 $200

2005 $210

2006 $220




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The French ad agency Havas, along with the London Business School, saysthat after a 2.3% fall in 2002, interactive marketing spending will make amajor turnaround this year, rising by 14.2%.

Initiative Media projects radio as France’s major spending growth mediumin 2003, with gains of 10.0%. Unfortunately, the ad firm offered noestimates for the Internet.

After a year of flat growth in 2002, total marketing spending in 2003 willgain by more than 5%, according to Havas.

Interactive Marketing Spending in France, 2002 &2003 (as a % increase vs. prior year)

2002-2.3%

2003 14.2%



Advertising Spending Growth in France, by Media,2003 (as a % increase vs. prior year)

Radio 10.0%

TV 3.7%

Outdoor 2.0%

Cinema 1.0%

Press* 0.9%



Total Marketing Spending in France, 2002 & 2003 (as a% increase vs. prior year)

2002 0.3%

2003 5.1%




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Budget allocations, however, will remain relatively stable, with minusculeincreases for media advertising and interactive marketing.

Marketing Spending Allocation in France, byCategory, 2002 & 2003 (as a % increase/decrease vs.prior year)

Media advertising

0.0%

0.6%

Sales promotion

-0.7%

-0.5%

Direct mail

-0.1%

0.1%

PR/sponsorship

0.4%

0.0%


-0.1%

0.3%

2002 2003




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ItalyOnline ad spending in Italy is less than half that of the levels reached in theUK, Germany, and France. According to PwC and Wilkofsky Gruen, itshould reach $80 million in 2003, and rise to $95 million by 2006.

However, those relatively small figures belie the steady development ofInternet advertising in Italy, as demonstrated by growth rates in the 5.6% to6.7% range from 2002 on through 2006.

Online Advertising Spending in Italy, 2000-2006 (inmillions)

2000 $71

2001 $71

2002 $75

2003 $80

2004 $85

2005 $90

2006 $95



Online Advertising Spending Growth in Italy,2001-2006 (as a % increase vs. prior year)

2001 0.0%

2002 5.6%

2003 6.7%

2004 6.3%

2005 5.9%

2006 5.6%




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The conservative estimates from Initiative Media say that Internet adspending in 2003 will remain flat, along with TV, newspaper, magazine,and outdoor ads. The only medium with a strong projection is cinemaadvertising, at 10.3% growth.

Spending figures from February 2003, while limited in scope, appear tosupport the Initiative Media contentions. Nielsen Media Research foundthat ad spending for television dropped by 2.0% relative to January 2003,for radio fell by 1.4%, and for all print declined by 1.7%.

Advertising Spending Growth in Italy, by Media, 2003(as a % increase/decrease vs. prior year)

Cinema 10.3%

Outdoor 1.3%

TV 0.3%

Internet 0.0%

Press*-0.8%

Radio-3.2%



Advertising Spending in Italy, by Media, February2003 (in millions of € and % change vs. same month ofprior year)

Television €375 (-2.0%)

Total print €203 (-1.7%)

National daily newspapers €69 (-9.9%)

Radio €23 (-1.4%)

Billboard €14 (30.0%)

Total €621 (-1.3%)

Note: numbers may not add to total due to some category overlapSource: Nielsen Media Research, April 2003; Dow Jones, April 2003



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Telecommunications was the only Italian industry posting ad spendinggains in February, with a 10% gain. At the far side, banks and insurersspent 37% less on advertising that month.

Advertising Spending Growth in Italy, by Industry,February 2003 (as a % change vs. same month of prioryear)

Telecommunications10%

Automotive-5%

Travel and tourism-28%

Banks and insurers-37%

Source: Nielsen Media Research, April 2003; Dow Jones, April 2003



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SpainAfter a severe online ad spending cutback of 10.2% in 2001, and near flatgrowth of 2.3% last year, Spain is poised for a significant spending boostthis year, according to PwC and Wilkofsky Gruen. Should the projected11.1% increase come to pass, that would be total online spending at $50million, or higher than the past three years.

Continuing spending growth would put the online ad market at $60 millionby 2006.

Online Advertising Spending Growth in Spain,2001-2006 (as a % increase/decrease vs. prior year)

2001-10.2%

2002 2.3%

2003 11.1%

2004 4.0%

2005 7.7%

2006 7.1%



Online Advertising Spending in Spain, 2000-2006 (inmillions)

2000 $49

2001 $44

2002 $45

2003 $50

2004 $52

2005 $56

2006 $60




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Data from Initiative Media on spending growth in other media for 2003appears somewhat suspicious, as the company is predicting the same 2.0%increase for each medium shown in the chart below.

Advertising Spending Growth in Spain, by Media, 2003(as a % increase vs. prior year)

TV 2.0%

Radio 2.0%

Press* 2.0%

Outdoor 2.0%

Cinema 2.0%

Internet 2.0%




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RussiaWith an economy that’s still in the process of establishing itself, at least inWestern terms, online advertising in Russia is both nascent and somewhatrepresentative of other former Eastern Bloc nations such as Poland and theCzech Republic. According to PwC and Wilkofsky Gruen, spending oninteractive advertising in 2002 was $15 million, and should nearly doubleto $29 million by 2006.

Last year in Russia, the online ad market was flat. However, the researcherssee a 13.3% spending jump this year, with even greater growth in the threeyears following. Yes, double-digit increases come more easily whenstarting from such low figures, but it also indicates the establishment ofonline advertising in general.

Online Advertising Spending in Russia, 2000-2006 (inmillions)

2000 $13

2001 $15

2002 $15

2003 $17

2004 $21

2005 $25

2006 $29



Online Advertising Spending Growth in Russia,2001-2006 (as a % increase vs. prior year)

2001 15.4%

2002 0.0%

2003 13.3%

2004 23.5%

2005 19.0%

2006 16.0%




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If the rise of Internet ad spending in Russia seems spectacular, then the35.4% increase for TV ad spending seems like a three-ring circus. Lesser butsimilar growth rates are seen this year for outdoor, cinema, newspaper,magazine, and radio ads, according to Initiative Media.

Many of the top advertisers in Russia are names familiar in the West, suchas Procter & Gamble, Nestle, and Unilever. These multinationals seepromise in an emerging market.

Advertising Spending Growth in Russia, by Media,2003 (as a % increase vs. prior year)

TV 35.4%

Outdoor 20.0%

Cinema 20.0%

Press* 15.5%

Radio 14.3%



Top Advertisers in Russia, Ranked by AdvertisingSpending, 2001 & 2002 (in millions*)

Procter & Gamble

$80.2

$105.0

Nestle (including Rossiya)

$44.7

$55.7

Unilever

$35.1

$53.9

Wimm-Bill-Dann

$26.0

$49.9

L’Oreal (including Garnier)

$22.6

$46.7

Mars Rossiya

$41.1

$45.0



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Henkel (including Schwarzkopf)

$24.5

$31.5

Wrigley

$33.3

$30.9

Mobile TeleSystems

$15.6

$30.2

LG Electronics

$17.7

$27.3

Coca-Cola

$18.6

$27.3

Beiersdorf AG

$11.4

$26.3

Samsung Electronics

$17.8

$24.2

PepsiCo

$29.2

$22.9

Beeline

$11.8

$22.3

2001 2002

Note: *includes reductions, does not include VATSource: RPRG, 2003; The Moscow Times, March 2003



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E.Asia-PacificAcross the broad region of the Asia-Pacific, more people go online both at work and at home than in any other area of the world. Estimates from eMarketer put that potential Internet advertising market at 205million in 2003.

Comparative Estimates: At-Home and At-WorkInternet Users in the Asia-Pacific Region, 2000-2006 (inmillions)


Computer Industry Almanac(CIA), March 2002

eMarketer, May 2002

IDATE, January 2003

International Data Corpora-tion (IDC), July 2002 (2)


PricewaterhouseCoopers(PwC)/Wilkofsky GruenAssociates, May 2002

World Bank/ PyramidResearch, March 2003 (3)

2000

–

–

115.9

–

–

63.0

–

92.5*

2001

–

115.0

165.0

123.0

94.0

88.0

168.7

133.1*

2002

151.3

–

181.5

180.0

–

117.0

209.8

209.0

2003

203.6

–

205.0

–

–

153.0

253.9

275.8

2004

238.0

357.0

235.8

–

–

191.0

293.1

355.4

2005

273.0

–

–

–

–

228.0

333.1

442.6

2006

313.4

–

47.0

375.0

–

–

371.9

531.4

Note: *actual; (1) Internet users are defined as individuals who consistentlyuse the Internet with access from either work, school, home or multiplelocations; (2) excludes Japan; (3) Number of active, unique individuals whohave used the Internet in the past 30 daysSource: eMarketer, May 2002; various, as noted, 2002 & 2003



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Outside of the US, the nation with the greatest Internet ad market is Japan,where spending is expected to reach $800 million this year and break the$1 billion barrier in 2005. The two other nations with near- or plus-$100million online ad spending figures for 2003 are Australia and China.

Other than the blip in Taiwan in 2001, Internet ad spending in all sevennations charted here is poised for growth, most often at double-digit rates.Even in Japan’s established online market, expected spending will rise by14.3% in 2003.

All these positive figures offer classic confirmation of spendingfollowing eyeballs.

Online Advertising Spending in the Asia-PacificRegion, by Country, 2001-2006 (in millions)

2001 2002 2003 2004 2005 2006

Australia $67 $90 $115 $140 $160 $180

China $50 $70 $90 $110 $130 $150

Hong Kong $14 $15 $16 $18 $20 $22

India $7 $8 $9 $10 $12 $14

Indonesia – – – – $1 $1

Japan $630 $700 $800 $950 $1,090 $1,200

Taiwan $27 $30 $33 $36 $40 $45

Thailand $9 $11 $13 $15 $17 $19

Total $804 $924 $1,076 $1,279 $1,470 $1,631

Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, NUA,IDC, May 2002


Online Advertising Spending Growth in theAsia-Pacific Region, by Country, 2001-2006

2001 2002 2003 2004 2005 2006 CAGR(2002-2006)

Australia 45.7% 34.3% 27.8% 21.7% 14.3% 12.5% 21.9%

China 51.5% 40.0% 28.6% 22.2% 18.2% 15.4% 24.6%

HongKong

0.0% 7.1% 6.7% 12.5% 11.1% 10.0% 9.5%

India 16.7% 14.3% 12.5% 11.1% 20.0% 16.7% 14.9%

Japan 15.0% 11.1% 14.3% 18.8% 14.7% 10.1% 13.8%

Taiwan -3.6% 11.1% 10.0% 9.1% 11.1% 12.5% 10.8%

Thailand 50.0% 22.2% 18.2% 15.4% 13.3% 11.8% 16.1%

Total 18.1% 14.9% 16.5% 18.9% 14.9% 11.0% 15.2%

Source: PricewaterhouseCoopers (PwC), Wilkofsky Gruen Associates, NUA,IDC, May 2002



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Total Media Spending: Asia-PacificThe growth curve for total media spending in the Asia-Pacific region, whilepositive, is nowhere as spectacular as for Internet advertising. Both PwC andZenith predict steady spending increases this year and in the three following.

Comparative Estimates: Advertising Spending in theAsia-Pacific Region, 2001-2006 (as a % increase/decrease vs. prior year)

2001

-0.8%

2002

0.7%

1.2%

2003

2.9%

4.1%

2004

5.1%

4.3%

2005

6.1%

4.8%

2006

7.0%






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In absolute dollars, total ad spending in the Asia-Pacific region is a bit lessthan in Europe. According to PwC, $72.87 billion is the figure for 2003,while Zenith weighs in at $66.94 billion.

However, analysts expect ad spending in at least one nation in the regionto soar this decade: China. As reported by Reuters in mid June 2003,Nielsen Media Research says, “China’s advertising market—worth $10billion in 2002—is set for double-digit growth annually in coming yearsand should overtake Japan to become the world’s second largest by 2010.The country of 340 million TV households is set for an advertising boom,helped by Beijing hosting the 2008 Olympic Games, as local and foreignfirms vie for increasingly affluent consumers.”

$81.27

$73.16

Comparative Estimates: Advertising Spending in theAsia-Pacific Region, 2000-2006 (in billions)

2000

$70.88

2001

$70.28

$63.54

2002

$70.79

$64.28

2003

$72.87

$66.94

2004

$76.61

$69.84

2005

2006

$87.00






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JapanFor now, however, Japan stands next to the US as the second largestadvertising market in the world—both online and offline. With an activeInternet audience, online ad spending will increase at healthy rates throughmid decade, and should reach $1.2 billion by 2006, according to PwC.

Online Advertising Spending Growth in Japan,2001-2006 (as a % increase vs. prior year)

2001 15.0%

2002 11.1%

2003 14.3%

2004 18.8%

2005 14.7%

2006 10.1%



Online Advertising Spending in Japan, 2000-2006 (inmillions)

2000 $548

2001 $630

2002 $700

2003 $800

2004 $950

2005 $1,090

2006 $1,200




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Research from Havas and the London Business School shows that for allinteractive marketing, spending in 2003 should bounce back from lastyear’s minor decline.

Initiative Media sees lesser growth in Japan’s ad market, with Internet adspending increasing by 5.0%, but every other category shown either flat or falling.

Zenith predicts total ad spending in 2003 at $35.36 billion, a mere 0.8%gain from last year’s figure.

Interactive Marketing Spending in Japan, 2002 & 2003(as a % increase vs. prior year)

2002-0.6%

2003 7.4%



Advertising Spending Growth in Japan, by Media,2003 (as a % increase/decrease vs. prior year)

Internet 5.0%

TV 0.6%

Radio 0.0%

Press*-1.2%

Outdoor-5.0%



Advertising Spending in Japan, 2001-2005 (in millions)

2001 $37,650

2002 $35,089

2003 $35,359

2004 $35,906

2005 $36,578




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However, at least that gain would counter the 6.8% spending loss in 2002’s market.

Estimates from Havas for total marketing expenditures differ little from Zenith’s, showing small 1.4% and 1.5% decreases in 2002 and 2003, respectively.

Advertising Spending Growth in Japan, 2002-2005 (asa % increase/decrease vs. prior year)

2002-6.8%

2003 0.8%

2004 1.5%

2005 1.9%



Total Marketing Spending in Japan, 2002 & 2003 (as a% decrease vs. prior year)

2002-1.4%

2003-1.5%




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Interactive marketing is the only category Havas says will have increasedspending allocation in 2003, and even that gain is only 0.7%.

In fact, other than the PwC numbers for Internet ad spending, all the otherfigures shown above picture a flat market for all types of advertising in Japan.

Marketing Spending Allocation in Japan, by Category,2002 & 2003 (as a % increase/decrease vs. prior year)

Media advertising

-0.3%

-0.3%

Sales promotion

-0.1%

-0.3%

Direct mail

-0.1%

-0.1%

PR/sponsorship

0.4%

0.1%


0.1%

0.7%

2002 2003




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AustraliaWith an active online community connecting the wide-open spaces inAustralia, PwC’s considerable growth figures for Internet ad spending makemuch sense. In 2003 alone, the predicted increase is nearly 30%.

Spending should surpass the $100 million mark this year.

Online Advertising Spending Growth in Australia,2001-2006 (as a % increase vs. prior year)

2001 45.7%

2002 34.3%

2003 27.8%

2004 21.7%

2005 14.3%

2006 12.5%



Online Advertising Spending in Australia, 2000-2006(in millions)

2000 $46

2001 $67

2002 $90

2003 $115

2004 $140

2005 $160

2006 $180




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Just as in the US, one online ad format making huge gains in Australia ispaid search. According to Jupiter Research, search advertising will take inmore than $24 million this year, rising to nearly $64 million by 2005.

Perhaps, as with Initiative Media’s data for Spain, the company’s estimatesfor Australia are too vague to put much weight on, with a standard 3.0%spending rise in all media shown.

Revenues from Paid Search Listings in Australia,2002-2005 (in millions)

2002 $10.0

2003 $24.3

2004 $40.7

2005 $63.8



Advertising Spending Growth in Australia, by Media,2003 (as a % increase vs. prior year)

TV 3.0%

Radio 3.0%

Press* 3.0%

Outdoor 3.0%

Cinema 3.0%




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F. Latin AmericaAccording to eMarketer, Internet users in Latin America will grow from33.1 million last year to over 60 million by 2004.

Online ad spending in Latin America is moderate, owing to the stilldeveloping status of many nations in the region. According to PwC,spending should surpass $200 million by next year.

Comparative Estimates: At-Home and At-WorkInternet Users in Latin America, 2000-2006 (inmillions)


eMarketer, May 2002

IDATE, January 2003


PricewaterhouseCoopers(PwC)/Wilkofsky Gruen Associates,May 2002

World Bank/ Pyramid Research,March 2003 (2)

2000

–

19.3

–

15.0

–

18.3*

2001

–

26.2

16.0

18.0

26.0

23.7*

2002

25.6

33.1

28.0

21.0

29.6

28.7

2003

32.7

43.4

–

26.0

35.7

35.5

2004

43.8

60.6

–

31.0

48.3

42.2

2005

59.5

–

–

40.0

62.9

48.2

2006

80.8

–

47.0

–

80.5

53.3

Note: *actual; (1) Internet users are defined as individuals who consistentlyuse the Internet with access from either work, school, home or multiplelocations; (2) Number of active, unique individuals who have used theInternet in the past 30 daysSource: eMarketer, May 2002; various, as noted, 2002 & 2003


Online Advertising Spending in Latin America,2000-2006 (in millions)

2000 $123

2001 $150

2002 $160

2003 $175

2004 $200

2005 $250

2006 $300




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Beginning from such a small base leaves great room for growth, as isshown for each year charted below.

Online Advertising Spending Growth in Latin America,2001-2006 (as a % increase vs. prior year)

2001 22.0%

2002 6.7%

2003 9.4%

2004 14.3%

2005 25.0%

2006 20.0%




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Total Media Spending: Latin AmericaThe total media ad market in Latin America appears ready to roll, after lastyear’s flat growth (PwC’s take) or sharp downturn (Zenith’s data).

Translated to absolute dollars, the spending estimates for 2003 come in ateither $15.57 billion (PwC) or $17.66 billion (Zenith). Again as an outlier,Initiative Media’s 2003 Latin America ad spending figure is only $9.4billion, far less than the other two researchers.

Comparative Estimates: Advertising Spending in LatinAmerica, 2001-2006 (as a % increase/decrease vs. prioryear)


PricewaterhouseCoopers (PwC)/Wilkofsky Gruen Associates May2002

Zenith Optimedia, December 2002

2001

-12.5%

-8.7%

–

2002

-36.4%

1.1%

-11.8%

2003

10.0%

4.2%

4.5%

2004

–

6.0%

7.4%

2005

–

7.4%

6.9%

2006

–

9.1%

–

Source: Initiative Media, March 2003; PricewaterhouseCoopers(PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December2002


Comparative Estimates: Advertising Spending in LatinAmerica, 2000-2006 (in billions)

Initiative Media, March2003

Pricewaterhouse-Coopers (PwC), May2002


2000

–

$16.9

–

2001

$13.4

$14.78

$19.17

2002

$8.5

$14.94

$16.90

2003

$9.4

$15.57

$17.66

2004

–

$16.50

$18.97

2005

–

$17.73

$20.29

2006

–

$19.34

–

Source: Initiative Media, March 2003; PricewaterhouseCoopers(PwC)/Wilkofsky Gruen Associates, May 2002; Zenith Optimedia, December2002


Methodology 7






Index of Charts 237


237



238


Table of Contents 3

Methodology 7The eMarketer Difference 8



I Measuring the Money: Last Year’s Perspective 11Comparative Estimates from July 2002: US Online Advertising Spending, 2000-2005 (in billions) 13

Comparative Estimates from July 2002: US Online Advertising Spending Growth,2001-2005 (as % increase/decrease vs. prior year) 14

II US Online Ad Spending 17A. Comparing Online with Offline 18

Slow Growth Years for Various US Advertising Media, by Number of YearsSpending Declined or Grew by 1.0% or Less, 1940-2002 19

B. Online Spending Yesterday & Today: 2000 to 2003 20Comparative Estimates: US Online Advertising Spending, 2002 & 2003 (in billions) 20

Comparative Estimates: US Online Advertising Spending Growth, 2002 & 2003(as a % increase/decrease vs. prior year) 21

US Online Advertising Revenues, by Web Publisher, 2000-2003 (as a % of totalrevenues) 22

Comparative Estimates: US Online Advertising Spending Growth, 2002 & 2003(as a % increase/decrease vs. prior year) 22

US Online Advertising Revenue Growth, by Web Publisher, 2000-2003 (as a %increase/decrease vs. prior year) 23

US Online Advertising Revenues, by Web Publisher, 2000-2003 (in millions) 23

Quarterly Reports 25

US Online Advertising Spending, Q1 2000-Q4 2002 (in billions) 25

Online Advertising: Industries & Companies 26

US Online Advertising Spending, Q1 2000-Q4 2002 (as a % increase/decrease vs.prior quarter and vs. same quarter of prior year) 26

Online’s Share of Total US Advertising, by Category, Q1 2001-Q1 2002 27

Online’s Share of Total US Advertising, by Category, Q1 2001 vs. Q1 2002 (as a %increase/decrease) 28

US Online Ad Spending, by Industry, 2001 & 2002 (in millions and as a %increase/decrease vs. prior year) 29

US Online Advertising Spending, by Industry Category, 2000-2002 (as a % of totalspending) 30

US Online Advertising Spending, by Industry Category, 2000-2002 (in billions) 31

US Online Advertising Spending Growth, by Industry Category, 2001 & 2002 (as a% increase/decrease vs. prior year) 32

US Online Advertising Spending, by Consumer Category, 2000-2002 (as a % oftotal spending) 33


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US Online Advertising Spending, by Consumer Category, 2000-2002 (in billions) 34

US Online Advertising Spending Growth, by Consumer Category, 2001 & 2002 (asa % increase/decrease vs. prior year) 35

Share of US Internet Advertising Revenues among Top 10, 25, and 50 Ad-SellingWeb Sites, Q4 2002 36


Comparison of US Internet Advertising Spending with and without AOL’sContribution, 1999-2002 (in billions) 38

Comparison of US Internet Advertising with and without AOL’s Contribution, Q21999-Q3 2002 (in millions) 38

US Online Advertising Revenues with and without AOL’s Contribution, 2000-2003(in billions) 39

AOL’s Share of Total US Internet Advertising Spending, Q1 1999-Q3 2002 40

AOL’s Share of Total US Internet Advertising Spending, 2000-2003 41

Comparison of US Internet Advertising Spending with and without AOL’sContribution, Q2 1999-Q3 2002 (as a % increase/decrease vs. prior quarter) 42

US Internet Advertising Revenue Growth with and without AOL’s Contribution,2001-2003 (as a % increase/decrease vs. prior year) 43

D. Online Spending Trends: 2000 to 2006 44US Online Advertising Spending, 2000-2006 (in billions) 44

US Online Advertising Spending Growth, 2001-2006 (as a % increase/decrease vs.prior year) 45

Comparative Estimates: US Online Advertising Spending, 2000-2006 (in billions) 46

Comparative Estimates: US Online Advertising Spending Growth, 2001-2006 (as a% increase/decrease vs. prior year) 47

US Online Advertising Spending per Online User, 2000-2006 48

US Online Advertising Spending, 2000-2006 (as a % of total media spending) 48

US Online B2C and B2B Advertising Spending, 2001-2005 (in billions) 49

US Online Advertising Spending per Online Household and User, 2001-2007 49

US Online B2C and B2B Advertising Spending Growth, 2002-2005 (as a % increasevs. prior year) 50

US Online B2C and B2B Advertising Spending, 2001-2005 (as a % of total spending) 50

Advertising Spending for Direct Marketing Interactive Media among US B2C andB2B Companies, 2000-2002 & 2006 (in billions) 51

Publicly Traded US Internet-Centric Companies Revenues and Sales & MarketingSpending, 2002 (in millions) 52

Publicly Traded US Internet-Centric Companies Revenues and Sales & MarketingSpending, 2002 (in millions) 53

Promotion Vehicles toward Which US Marketers Concentrated Most of TheirBudget, 2002 (as a % of respondents) 54



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Online Ad Spending: What Is Measured? How Is It Measured?, 2003 56

Online Ad Spending: What Is Measured? How Is It Measured?, 2003 57

F. Online Ad Format Spending 58US Online Advertising Spending, by Vehicle, 2000-2002 (as a % of total spending) 58

US Online Advertising Spending, by Vehicle, 2000-2002 (as a % of total spending) 59

US Online Advertising Spending, by Vehicle, 2000-2002 (in millions) 59

US Online Advertising Spending, by Vehicle, 2000-2002 (in millions) 60

US Online Advertising Spending, by Vehicle, 2001 & 2002 (as a %increase/decrease vs. prior year) 61

Banner Ads 62

Banner Ad Spending in the US, 2000-2002 (in millions) 62

Banner Ad Spending in the US, 2000-2002 (as a % of total spending) 62

Online Sponsorship 63

Online Sponsorship Ad Spending in the US, 2000-2002 (in millions) 63

Online Sponsorship Ad Spending in the US, 2000-2002 (as a % of total spending) 63

Search Advertising 64

Online Search Ad Spending in the US, 2000-2002 (in millions) 64

Online Search Ad Spending in the US, 2000-2002 (as a % of total spending) 64

Online Search Ad Spending in the US, 2001 & 2002 (as a % increase vs. prior year) 65

Online Classified Ads 66

Online Classified Ad Spending in the US, 2000-2002 (as a % of total spending) 66

Online Classified Ad Spending in the US, 2000-2002 (in millions) 66

Rich Media 67

Rich Media Ad Spending in the US, 2000-2002 (in millions) 67

Rich Media Ad Spending in the US, 2000-2002 (as a % of total spending) 67

Interstitials & Pop-Up Ads 68

Interstitial Ad Spending in the US, 2000-2002 (in millions) 68

Interstitial Ad Spending in the US, 2000-2002 (as a % of total spending) 68

E-Mail Advertising 69

E-Mail Ad Spending in the US, 2000-2002 (in millions) 69

E-Mail Ad Spending in the US, 2000-2002 (as a % of total spending) 69

G. Plans for Online Ad Spending 70Online Advertising Spending Plans for the Next 12 Months among USAdvertising Executives, August 2002 (as a % of respondents) 70

Online Advertising Spending Plans among US Advertising Executives for theNext 12 Months, August 2002 (as a % of respondents) 71

Marketing Spending Allocation in the US, by Category, 2002 & 2003 (as a %increase/decrease vs. prior year) 72


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US Media Planners’ Opinions Regarding Whether their Jobs Will Be Tougher, 2003vs. 2002 (as a % of respondents) 73

US Media Planners’ Opinions Regarding Whether the Economy SignificantlyImpacts Media Budgets, 2003 (as a % of respondents) 73

Ad Media that US Media Planners Will Be Spending More on in 2003, (as a % ofrespondents) 74

How Far in Advance Do US Media Professionals Plan Spending, 2003 (as a % ofrespondents) 74

Ad Media that US Media Planners Will Be Spending Less on in 2003, (as a % ofrespondents) 75

Where US Media Planners Expect to Focus Most of Their Media Spending in2003, (as a % of respondents) 75

Issues US Advertising Executives Rate as “Very” or “Extremely Influential” forIncreasing Online Ad Spending in the Next 12 Months, August 2002 (as a % ofrespondents) 77

H. Pricing Models, Pricing Trends 78US Online Advertising Revenues, by Pricing Model, 2000-2002 (as a % of totalrevenues) 79

US Online Advertising Revenue Growth, by Pricing Model, 2001 & 2002 (as a %increase/decrease vs. prior year) 80

US Online Advertising Revenues, by Pricing Model, 2000-2002 (in billions) 81

US Online Advertising Spending, by Pricing Model, 2001-2007 (in millions) 82

US Online Advertising Spending, by Pricing Model, 2001-2007 (as a % of totalmedia buys) 82

Effective CPM for US Online Advertising, 2002-2007 (as a % increase/decrease vs.prior year) 83

Effective CPM for US Online Advertising, 2001-2007 83

Average Full Banner Rate Card* in the US, by Web Site Genre, Q3 2002-Q4 2002 (indollars per thousand impressions) 84

Average Full Banner Rate Card* in the US, by Web Site Genre, Q3 2002-Q4 2002 (indollars per thousand impressions) 85

Transaction Types 86

US Online Advertising Revenues, by Transaction Type, 2000-2002 (as a % of totalrevenues) 86

US Online Advertising Revenues, by Transaction Type, 2000-2002 (in billions) 87

III US Offline Ad Spending 89A. Spending Plans for Total Media 90

US Media Planners’ Opinions Regarding the Change in Size of Media Budgets in2003, (as a % of respondents) 90

US Marketers’ Intent to Increase or Decrease Advertising and MarketingBudgets, 2003 (as a % of respondents) 91

Change in Marketing Budget among US Marketers, 2003 vs. 2002 (as a % ofrespondents) 91



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US Advertising Spending Growth, 2000-2006 (as a % increase/decrease vs. prioryear) 92

US Advertising Spending, 2000-2006 (in billions) 92

Comparative Estimates: US Advertising Spending Growth, 2003 (as a %increase/decrease vs. prior year) 94

Comparative Estimates: US Advertising Spending Growth, 2001-2006 (as a %increase/decrease vs. prior year) 95

Comparative Estimates: US Advertising Spending, 2001-2006 (in billions) 96

Advertising Spending in the US, 2003 (as a % growth vs. prior year) 97

C. The Offline Ad Market 98US Local and National Advertising Spending, 2001 & 2002 (in billions) 98

By Media 99

US Advertising Spending Share, by Media, 2001 & 2006 99

Advertising Spending in the US, by Media, 2003 (as a % growth vs. prior year) 100

US Advertising Spending, by Media, Q1 2002 vs. Q1 2003 (in millions and as a %increase/decrease vs. prior year) 101

US Advertising Spending Growth, by Media, Q1 2003 (as a % increase/decreasevs. Q1 2002) 102

US Advertising Spending, by Media, 2001 & 2002 (in billions and as a %increase/decrease vs. prior year) 103

By Industry & Advertiser 104

Top 10 Computers & Consumer Electronics Web Sites among At-Home InternetUsers in the US, Week Ending 4 May 2003 (unique audience in thousands and %active reach) 104

Top 10 US Industries by Advertising Spending, 2001 & 2002 (in billions and as a %change year-over-year) 105

Top 10 Advertisers in the US, January-February 2003 (in millions and as a %increase/decrease vs. January-February 2002) 106

Top 10 US Advertisers Ranked by Ad Spending, Q1 2002 vs. Q1 2003 (in millionsand as a % increase/decrease vs. prior year) 107

Publicly Traded US Internet-Centric Companies Ad Spending in TraditionalMedia, 1999-2002 (in millions) 108

Promotion Spending 109

Promotion Spending in the US, by Industry Segment, 2001 & 2002 (in millions andas a % change) 109

Hispanic Market Spending 110

Hispanic Market Advertising Spending in the US, by Media, 2001-2004 (in millions) 110

Hispanic Market Advertising Spending in the US, by Media, 2001-2004 (as a % ofmarket share) 110

Advertising Spending in the US Hispanic Market, by Media, 2002 (in millions) 111

D. Broadcast Spending 112Comparative Estimates: US Television Advertising Spending, 2000-2006 (in billions) 112


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Comparative Estimates: US Television Advertising Spending Growth, 2001-2006(as a % increase/decrease vs. prior year) 113

Factors that Influence US Media Planners Who Are Planning to Spend More onTV in 2003, (as a % of respondents) 114

Comparative Estimates: US Radio Advertising Spending Growth, 2001-2006 (as a% increase/decrease vs. prior year) 115

Comparative Estimates: US Radio Advertising Spending, 2000-2006 (in billions) 115

E. Print Spending 116Comparative Estimates: US Newspaper Advertising Spending, 2000-2006 (inbillions) 116

Comparative Estimates: US Newspaper Advertising Spending Growth, 2001-2006(as a % increase/decrease vs. prior year) 117

Comparative Estimates: US Magazine Advertising Spending, 2000-2006 (in billions) 118

Comparative Estimates: US Magazine Advertising Spending Growth, 2001-2006(as a % increase/decrease vs. prior year) 119

US Magazine Advertising Spending, by Industry Category, February 2002 &February 2003 120

F. Other Offline Spending 121Comparative Estimates: US Direct Mail Advertising Spending Growth, 2001-2006(as a % increase vs. prior year) 121

Comparative Estimates: US Direct Mail Advertising Spending, 2000-2006 (inbillions) 121

Comparative Estimates: US Yellow Pages Advertising Spending Growth, 2001-2006 (as a % increase vs. prior year) 122

Comparative Estimates: US Yellow Pages Advertising Spending, 2000-2006 (inbillions) 122

Comparative Estimates: US Outdoor Advertising Spending Growth, 2001-2006 (asa % increase/decrease vs. prior year) 123

Comparative Estimates: US Outdoor Advertising Spending, 2000-2006 (in billions) 123

IV Cross-Media Trends 125A. Attitudes Toward Cross-Media Advertising 126

US Media Planners’ Opinions Regarding the Advertising Value of Various Media,2003 (as a % of respondents) 126

Online Advertising Objectives among US Marketers, 2002 (as a % of respondents) 127

Advertising Media that Affluent US Adults Would Definitely or Probably Includein a Campaign to Reach People Like Themselves, January 2003 (as a % ofrespondents) 128

Media Suggested by US “Business Decision Makers” for Use in an AdvertisingCampaign Targeted at Them, 2002 (as a % of respondents) 129

Opinions of US “Business Decision Makers” Regarding the Advertising TheyEncounter, by Media Type, 2002 (as a % of respondents) 130


244


Attitudes toward Advertising among At-Work Internet Users in the US, byMedium, 2003 (as a % of respondents) 131

Degree to Which US Ad Agencies and Corporate Marketing Departments HaveOrganized to Deliver Integrated Marketing, 2002 (as a % of respondents) 132

B. Media Measurement: Apples to Apples? 133US Online Marketing Impressions per Internet User per Day, 2001-2007 135

Methods to Plan or Measure Online Advertising that US Advertising ExecutivesExpect to Use in the Next 12 Months, August 2002 (as a % of respondents) 136

Metrics US Marketers Use to Measure Online Advertising Campaigns, 2002 (as a% of respondents) 137

Average Click-Through Rates for Online Ads Worldwide, Q1 2002-Q4 2002 138

GRPs* of Top 25 US Web Sites, TV Shows and Magazines, by Demographic Group,2001 & 2002 139

Average GRP* among Top 25 US Web Sites, TV Shows, and Magazines, byDemographic Group, 2001 & 2002 140

Audience Size of US Adults Ages 18-49 among Top 12 Web Sites, TV Shows, andMagazines, 2001 & 2002 (in millions) 141

Factors that Influence US Media Planners When Selecting Media, 2003 (as a % ofrespondents) 142

Cross-Media Metric Tools 143

Sample Media Plan to Reach Half of US Households via Online Advertising,2003 144

Costs and Targeted Rating Points for Sample Media Plan to Reach Half of USHouseholds via Online Advertising, 2003 145

Sample Media Plan to Reach Half of US Households via Online Advertising,2003 145

Costs and Targeted Rating Points for Sample Media Plan to Reach Half of USHouseholds via Online Advertising, 2003 146

C. Cross-Media Optimization 147Measuring the Online Ad Impact for Unilever’s Dove Personal Care Brand,2002 147

Average Exposure of Female Consumers to Dove Nutrium Bar Ads, by Medium,2001 (in number of impressions) 148

Purchase Intent for Dove Nutrium Bar, by Number of Online Ad Exposures, 2001(as a % of female consumers) 148

Target Audience* for McDonald’s Cross-Media Ad Campaign**, by Internet andTV Use Levels, 2002 149

Reach, Frequency, and Targeted Rating Points (TRPs) for McDonald’s Cross-Media Ad Campaign*, by Medium, 2002 150

Product Image Responses* to McDonald’s Cross-Media Ad Campaign**, 2002 (asa % of respondents) 151

Comparative Branding Metrics for McDonald’s Ad on Television and Online, 2003(based on % incremental lift) 152

Purchase Intent for Colgate Total Toothpaste, by Share of Budget Allocated toOnline, 2003 (as a % increase pre-campaign) 153


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Current and Recommended Online Advertising Budget Shares for VariousConsumer Brands, 2003 154

Attitudes toward Advertising among At-Work Internet Users Who Are Light TVViewers* in the US, by Medium, 2003 (as a % of respondents) 155

D. Four More Cross-Media Scenarios 157American Airlines 158

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* forAmerican Airlines’ Campaign, 2002 158

Effect of Increased Internet Ad Budget on Frequency of Exposure among US TVViewers for American Airlines’ Campaign, by Frequency of TV Use, 2002 159

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers forAmerican Airlines’ Campaign, by Frequency of TV Use, 2002 159

Subaru 160

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers forSubaru’s Campaign, by Frequency of TV Use, 2002 160

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* forSubaru’s Campaign, 2002 160

Effect of Increased Internet Ad Budget on Frequency of Exposure among US TVViewers for Subaru’s Campaign, by Frequency of TV Use, 2002 161

Oscar Mayer 162

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers for OscarMayer’s Campaign, by Frequency of TV Use, 2002 162

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* forOscar Mayer’s Campaign, 2002 162

Effect of Increased Internet Ad Budget on Frequency of Exposure among US TVViewers for Oscar Mayer’s Campaign, by Frequency of TV Use, 2002 163

Planters Peanuts 164

Effect of Increased Internet Ad Budget on GRPs* among US TV Viewers forPlanters Peanuts’ Campaign, by Frequency of TV Use, 2002 164

Effect of Increased Internet Ad Budget on Reach, Frequency, and GRPs* forPlanters Peanuts’ Campaign, 2002 164

Effect of Increased Internet Ad Budget on Frequency of Exposure among US TVViewers for Planters Peanuts’ Campaign, by Frequency of TV Use, 2002 165

Comparative Effect of Increased Internet Ad Budgets on GRPs* among US TVViewers, by Frequency of TV Use, 2002 (as a % increase/decrease vs. originalbudget) 166

Comparative Effect of Increased Internet Ad Budgets on Frequency of Exposureamong US TV Viewers, by Frequency of TV Use, 2002 (as a % increase/decreasevs. original budget) 167

E. Cross-Media: Driving Traffic Online 168Daily US Visitors to the AT&T Wireless Web Site, 1 March 2003 - 4 April 2003 (as %of visitors in telecommunications category) 168

Daily US Visitors to the AT&T Wireless Web Site, 1 March 2003 - 4 April 2003 (as %of visitors in telecommunications category) 169

Daily US Visitors to the Ben & Jerry’s and Baskin-Robbins Web Sites, 17 April2003-7 May 2003 (as a % of total US Web visitors) 170


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Daily US Visitors to the Pepsi Cola and Coca-Cola Web Sites, 15 March 2003-26March 2003 (as a % of total US Web visitors) 171

F. Consumer Media Consumption 172Annual Use of Media among US Consumers, 2000-2006 (in hours) 172

Growth Rate in Media Use among US Consumers, 2000-2006 (as a %increase/decrease) 173

Comparative Estimates: Average Time Spent Online by Internet Users in the US,2002 (in minutes per day) 174

Comparative Estimates: Average Time Spent Online by Internet Users in the US,2002 (and per year) 175

Average Number of Hours Spent Online per Week by Internet Users in the US,2000-2002 175

Average Number of Hours Spent Online per Week by Internet Users in the US, byExperience Online, 2002 176

V Global Advertising Spending 177Comparative Estimates: At-Home and At-Work Internet Users Worldwide, 2000-2006 (in millions) 178

Time Spent Online by Consumers at Home and Work in Select CountriesWorldwide, 2002 (in average hours per week) 179

A. Internet Ad Spending: Worldwide & Regional 180Comparative Estimates: Worldwide Online Advertising Spending Growth, 2001-2006 (in billions) 180

Comparative Estimates: Worldwide Online Advertising Spending, 2000-2006 (inbillions) 180

Worldwide Online Advertising Spending, by Region, 2000-2006 (in millions) 181

Interactive Marketing Spending in Select Countries*, 2002 & 2003 (as a %increase vs. prior year) 181

Worldwide Online Advertising Spending, by Region, 2001-2006 (as a %increase/decrease vs. prior year) 182

Worldwide Online Advertising Spending, by Region, 2000-2006 (as a share ofworldwide spending) 182

Online Advertising Spending per Internet User, by Nation, 2000-2006 (ranked by2003 spending) 183

Interactive Marketing Spending in Select Countries, 2002 & 2003 (as a %increase/decrease vs. prior year) 184

Interactive Marketing Spending in Select Countries*, by Industry Sectors, 2002 &2003 (as a % increase/decrease vs. prior year) 185

B. Total Ad Spending: Worldwide & Regional 186Comparative Estimates: Worldwide Advertising Spending Growth, 2001-2006 (asa % increase/decrease vs. prior year) 186

Comparative Estimates: Worldwide Advertising Spending, 2000-2006 (in billions) 186

Advertising Spending Worldwide, by Region, 2001-2006 (as a % of total spendingand in billions) 187

Advertising Spending Worldwide, by Region, 2001-2006 (in billions) 187


247


Advertising Spending Growth Worldwide, by Region, 2001-2006 (as a %increase/decrease vs. prior year) 188

Regional Marketing 189

Total Marketing Spending in Select Countries*, by Category, 2002 & 2003 (as a %increase/decrease vs. prior year) 189

Marketing Spending Allocation in Select Countries*, 2002 & 2003 (as a %increase/decrease vs. prior year) 190

Marketing Spending Allocation in Select Countries, by Category, 2001 190

Total Marketing Spending in Select Countries*, by Industry Sectors, 2002 & 2003(as a % increase/decrease vs. prior year) 191

C. Canada 192Online Households in Canada: Dial-Up vs. Broadband, 2001 & 2002 (as a % ofonline households) 192

Comparative Estimates: At-Home and At-Work Internet Users in Canada, 2000-2006 (in millions) 192

Online Advertising Spending Growth in Canada, 2001-2006 (as a % increase vs.prior year) 193

Online Advertising Spending in Canada, 2000-2006 (in millions) 193

Total Media Spending: Canada 194

Average Ad Budget Increase among Canadian Companies, by Media, 2002 (as a %of respondents) 194

Change in Ad Budgets among Canadian Companies, by Media, 2002 (as a % ofrespondents) 195

Comparative Estimates: Advertising Spending in Canada, 2000-2006 (in billions) 196

Comparative Estimates: Advertising Spending in Canada, 2000-2006 (as a %increase vs. prior year) 197

D. Europe 198Comparative Estimates: At-Home and At-Work Internet Users in Europe, 2000-2006 (in millions) 198

Online Advertising Spending in Europe, by Country, 2000-2006 (in millions) 199

Online Advertising Spending Growth in Europe, by Country, 2001-2006 200

Internet’s Share of Total Advertising Spending in Europe, 2000-2006 (in billions) 201

Total Media Spending: Europe 202

Comparative Estimates: Advertising Spending in Europe, 2000-2006 (in billions) 202

Advertising Spending in Select Countries in Europe, 2001-2005 (in millions) 203

Comparative Estimates: Advertising Spending in Europe, 2001-2006 (as a %increase/decrease vs. prior year) 203

Advertising Spending Growth in Select Countries in Europe, 2002-2005 (as a %increase/decrease vs. prior year) 204

United Kingdom 205

Online Advertising Spending in the UK, 2000-2006 (in millions) 205


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Online Advertising Spending Growth in the UK, 2001-2006 (as a % increase vs.prior year) 205

Total Marketing Spending in the UK, 2002 & 2003 (as a % increase vs. prior year) 206

Interactive Marketing Spending in the UK, 2002 & 2003 (as a % increase vs. prioryear) 206

Advertising Spending Growth in the UK, by Media, 2003 (as a % increase vs. prioryear) 206

Marketing Spending Allocation in the UK, by Category, 2002 & 2003 (as a %increase/decrease vs. prior year) 207

Advertising Spending in the UK, by Medium, Q2 2001-Q4 2002 (as a %increase/decrease vs. prior year) 208

Advertising Spending in the UK, by Medium, 2001 & 2002 (in millions of £ and %change) 208

Newspaper Display and Classified Advertising Spending in the UK, 2001 & 2002(in millions of £ and % increase/decrease vs. prior year) 209

Germany 210

Online Advertising Spending Growth in Germany, 2001-2006 (as a %increase/decrease vs. prior year) 210

Interactive Marketing Spending in Germany, 2002 & 2003 (as a % increase vs.prior year) 210

Advertising Spending Growth in Germany, by Media, 2003 (as a % decrease vs.prior year) 211

Online Advertising Spending in Germany, 2000-2006 (in millions) 211

Marketing Spending Allocation in Germany, by Category, 2002 & 2003 (as a %increase/decrease vs. prior year) 212

Total Marketing Spending in Germany, 2002 & 2003 (as a % increase/decrease vs.prior year) 212

France 213

Online Advertising Spending in France, 2000-2006 (in millions) 213

Online Advertising Spending Growth in France, 2001-2006 (as a %increase/decrease vs. prior year) 213

Total Marketing Spending in France, 2002 & 2003 (as a % increase vs. prior year) 214

Advertising Spending Growth in France, by Media, 2003 (as a % increase vs. prioryear) 214

Interactive Marketing Spending in France, 2002 & 2003 (as a % increase vs. prioryear) 214

Marketing Spending Allocation in France, by Category, 2002 & 2003 (as a %increase/decrease vs. prior year) 215

Italy 216

Online Advertising Spending Growth in Italy, 2001-2006 (as a % increase vs. prioryear) 216

Online Advertising Spending in Italy, 2000-2006 (in millions) 216

Advertising Spending in Italy, by Media, February 2003 (in millions of € and %change vs. same month of prior year) 217


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Advertising Spending Growth in Italy, by Media, 2003 (as a % increase/decreasevs. prior year) 217

Advertising Spending Growth in Italy, by Industry, February 2003 (as a % changevs. same month of prior year) 218

Spain 219

Online Advertising Spending in Spain, 2000-2006 (in millions) 219

Online Advertising Spending Growth in Spain, 2001-2006 (as a %increase/decrease vs. prior year) 219

Advertising Spending Growth in Spain, by Media, 2003 (as a % increase vs. prioryear) 220

Russia 221

Online Advertising Spending Growth in Russia, 2001-2006 (as a % increase vs.prior year) 221

Online Advertising Spending in Russia, 2000-2006 (in millions) 221

Top Advertisers in Russia, Ranked by Advertising Spending, 2001 & 2002 (inmillions*) 222

Advertising Spending Growth in Russia, by Media, 2003 (as a % increase vs. prioryear) 222

Top Advertisers in Russia, Ranked by Advertising Spending, 2001 & 2002 (inmillions*) 223

E. Asia-Pacific 224Comparative Estimates: At-Home and At-Work Internet Users in the Asia-PacificRegion, 2000-2006 (in millions) 224

Online Advertising Spending Growth in the Asia-Pacific Region, by Country, 2001-2006 225

Online Advertising Spending in the Asia-Pacific Region, by Country, 2001-2006 (inmillions) 225

Total Media Spending: Asia-Pacific 226

Comparative Estimates: Advertising Spending in the Asia-Pacific Region, 2001-2006 (as a % increase/decrease vs. prior year) 226

Comparative Estimates: Advertising Spending in the Asia-Pacific Region, 2000-2006 (in billions) 227

Japan 228

Online Advertising Spending in Japan, 2000-2006 (in millions) 228

Online Advertising Spending Growth in Japan, 2001-2006 (as a % increase vs.prior year) 228

Advertising Spending in Japan, 2001-2005 (in millions) 229

Advertising Spending Growth in Japan, by Media, 2003 (as a %increase/decrease vs. prior year) 229

Interactive Marketing Spending in Japan, 2002 & 2003 (as a % increase vs. prioryear) 229

Total Marketing Spending in Japan, 2002 & 2003 (as a % decrease vs. prior year) 230

Advertising Spending Growth in Japan, 2002-2005 (as a % increase/decrease vs.prior year) 230


250


Marketing Spending Allocation in Japan, by Category, 2002 & 2003 (as a %increase/decrease vs. prior year) 231

Australia 232

Online Advertising Spending in Australia, 2000-2006 (in millions) 232

Online Advertising Spending Growth in Australia, 2001-2006 (as a % increase vs.prior year) 232

Advertising Spending Growth in Australia, by Media, 2003 (as a % increase vs.prior year) 233

Revenues from Paid Search Listings in Australia, 2002-2005 (in millions) 233

F. Latin America 234Online Advertising Spending in Latin America, 2000-2006 (in millions) 234

Comparative Estimates: At-Home and At-Work Internet Users in Latin America,2000-2006 (in millions) 234

Online Advertising Spending Growth in Latin America, 2001-2006 (as a %increase vs. prior year) 235

Total Media Spending: Latin America 236

Comparative Estimates: Advertising Spending in Latin America, 2000-2006 (inbillions) 236

Comparative Estimates: Advertising Spending in Latin America, 2001-2006 (as a% increase/decrease vs. prior year) 236

Index of Charts 237


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The European Wireless reportAnalysis of the wireless market throughout Europe, covering retail and businessapplications, technology infrastructure, subscriber populations, and mobile apps.



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The US Online Holiday Shopping reportA comprehensive update of the leading trends in e-business and online retailing inthe world's largest Internet market, the United States, and also looks at thegrowing world market.


Essential E-Business Numbers for Marketers, Q3 2002A quick-reference, "stats-only" report. Data gathered from hundreds of sources iscombined with eMarketer ’s own forecasts, and presented in side-by-side tables,graphs and source comparison charts.


Latin America Online: Demographics, Usage & E-CommerceA comprehensive update of the leading trends in e-business and online retailing,with a focus on six countries that form the "core" of the region’s online market.


Interactive Banking: Integrating Online into Traditional ChannelsA comprehensive overview of the interactive banking market. "Interactive," notjust "online," because banking is being transformed into a cross-channel business.


Retail Industry OnlineCovers the three major areas of retailers’ business operations that have beenimpacted by the Internet: 1) IT and e-business spending, 2) online advertising and 3)selling to consumers online.


North American Wireless Market: On the Road to 3GAs mobile voice penetration approaches 50%, a heated marketing battle is shapingup between North American wireless operators. Find out why--and what it meansfor your business.


Asia-Pacific Online: Access, Demographics and UsageA comprehensive update of the leading trends in Internet usage and userdemographics in the Asia-Pacific region, with a focus on eight "core" countries.


Asia-Pacific E-Commerce: B2B & B2CProvides a thorough analysis of the demographic characteristics, usage patternsand category preferences of online shoppers in the Asia-Pacific region.


Online Selling & eCRMA compilation of the latest survey and forecast data examining the current trendsfacing companies operating commercial Web sites.



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Broadband & Dial-Up AccessExamines the residential broadband and dial-up Internet access markets in 27countries across four regions. The report covers technologies, major players andtrends in broadband access costs.


E-Mail Marketing: Strategies, Stats, Techniques & ToolsGathering the latest findings from leading researchers, the report tracks the steadygrowth of e-mail marketing and shows why it is rapidly becoming one of amarketer's sharpest tools.


The Pharmaceutical Industry OnlineAn essential reference tool covering all aspects of the pharmaceutical industryonline from companies using the Internet for trading, to the consumer using theInternet to research and buy pharmaceuticals.


Online Investing: Brokers, Investors, Statistics, and Market TrendsProvides a wide-ranging analysis of the trends and strategies that shape today's interactive investing market - along with guidelines on how to takeadvantage of them.


Europe E-Commerce: B2B & B2CProvides a comprehensive review of data from leading research firms andgovernment organizations regarding revenue forecasts for B2B and B2C e-commerce.


CPG OnlineA comprehensive review of how CPG companies are working with each other andwith the consumer online. It is the ideal resource for retailers, wholesale/distributors, consultancies and marketers.


Europe Online: Access, Demographics and UsageAn overview of Internet users and usage in the 12 "core" countries that bestrepresent the region's market, including Internet penetration rates in each country,how users are accessing the Internet, and why.


The Benefits of BroadbandA review of all available research quantifying the economic benefits of broadband.The report covers supply and demand for broadband in the US, and analyzes directand indirect benefits of widespread adoption.



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North America E-Commerce: B2C & B2BA comprehensive overview of e-commerce in the US and Canada, including analysisof online shoppers versus buyers, the factors that influence people to buy onlineand the demographics of online buyers.


PDA Market reportReviews the status of the worldwide PDA/handheld computer market from theperspective of data-centric devices, and analyzes the trends that are shaping itsfuture growth.


Interactive TV: Reality & OpportunityAn overview of worldwide iTV usage and revenue prospects, television commerce,iTV advertising, video-on-demand, personal video recorders and iTV services.


E-Commerce Trade and B2B ExchangesA comprehensive update of the leading trends shaping e-business decisions in2002, focusing on the multiple channels businesses are using to migrate theirbusiness-to-business (B2B) trade onto the Internet.


Online AdvertisingA definitive, objective look at the online ad market, including the pros and cons of emerging ad formats and the role of online advertising within a traditional media campaign.


North America OnlineA comprehensive overview of the North American Internet user and market,focusing on US and Canadian user demographics, access and usage.


Travel Market WorldwideProvides a clear picture of the current situation in the travel industry, withinformation and statistics regarding travel purchased both online and offline.


For more information, or to order a copy, contact eMarketer at:

Phone: 212.677.6300 Fax: 212.777.1172

eMail: [email protected] Web: www.emarketer.com

For Sales Inquiries: For Media Inquiries:Nick Lovett David [email protected] Director of Media Relations212.763.6031 [email protected]

212.763.6038

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