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Wednesday, April 06, 2005

Media Buyers: Online Ad Spending Continues To Surge

MediaPost Publications Home of MediaDailyNews, MEDIA and OMMA Magazines
Media Buyers: Online Ad Spending Continues To Surge
by Wendy Davis, Wednesday, Apr 6, 2005 7:30 AM EST
ONLINE AD SPENDING CONTINUED TO grow at a robust pace in the first quarter, according to a new study conducted by Deutsche Bank in conjunction with MediaPost. The report, released today, shows that marketers spent more on Internet advertising in the first quarter of this year than the last quarter of 2004.
For the report, 108 media executives were questioned in March about their clients' experiences with Internet advertising in the first quarter, and expectations for the second quarter. This survey, which was conducted online by InsightExpress using members of the MediaPost advisory panel, is the second of an ongoing series of quarterly studies of media professionals by MediaPost and Deutsche Bank.

More than two out of three--71 percent--of executives surveyed said that their clients' spending increased from the last quarter of 2004, while an additional 16 percent reported that budgets were flat. Almost half of all survey respondents (44 percent) said marketers increased spending by at least 11 percent--including 7 percent who reported increases of more than 30 percent.

The strong results indicate that online advertising continues to experience a resurgence, despite recent declines in the stock prices of companies including Yahoo! and Google. "All things really do point to a very healthy industry, notwithstanding what we tend to watch--which is the stock prices," said Jeetil Patel, a Deutsche Bank senior analyst.

Deutsche Bank calculated that respondents reported a total quarter-over-quarter ad spend increase of 11 percent, based on the weighted dollar amount of spending managed by each respondent. But, Patel said, the industry-wide online ad spend might have increased at a different rate, because most of the survey respondents' ad budgets--57 percent--went to display advertising, while just 20 percent of the budgets were allocated to search.

Survey results might show a rosier picture than the one that emerged after some Internet companies reported fourth-quarter earnings. For instance, after fourth-quarter results were published earlier this year, Deutsche Bank estimated a 7 percent quarter-over-quarter decline in Yahoo!'s branded ad business and a 7 percent decline in iVillage's online ad business.

Deutsche Bank also found that publishers still have the edge in setting prices for display ads, especially for premium sites--with 73 percent of executives saying that impressions on home pages, vertical channels, and rich media cost more in the first three months of this year than the last quarter of 2004. Almost half of the respondents--49 percent--said that prices for premium inventory increased between 1 and 10 percent; 16 percent of respondents reported an increase of between 11 and 20 percent; 7 percent of executives said prices went up between 21 and 30 percent; and 1 percent of respondents reported an increase of greater than 30 percent.

Most respondents--55 percent--also saw cost increases for run-of-network inventory--although, according to Deutsche Bank, as much as 50 percent of inventory on large networks, such as Yahoo!, either goes for as little as $1 to $3 per thousand impressions, or remains unsold.

Overall, Deutsche Bank concluded that the cost of premium inventory was about 7 percent more in the first quarter of this year than the last quarter of 2004, while run-of-network inventory was about 4 percent more expensive.

The largest proportion of branding dollars--35 percent--went to niche sites such as iVillage and Marketwatch. Twenty-one percent went to the three largest portals, with Yahoo! capturing 11 percent--as much as MSN and America Online combined (MSN had 6 percent and America Online had 5 percent.)An additional 13 percent went to Web sites of local media, while 11 percent went to ad networks. The remaining 20 percent went to various other sites, including Web sites of local media.

The vast majority of respondents--69 percent--also reported spending more to buy sponsored listings on search engines. Thirty-five percent of executives said cost-per-click had increased between 1 and 10 percent, while 25 percent reported a price increase of 11 to 20 percent; 9 percent of respondents said paid search was now at least 21 percent more expensive than in the last quarter of 2004.

Which search engines did they use? Not surprisingly, Google and Yahoo!'s Overture captured the lion's share of search dollars, with Google accounting for 53 percent of search budgets and Overture accounting for 28 percent. An additional 4 percent of search dollars went to Findwhat and 4 percent went to MSN--which, although it hasn't launched wide-scale sponsored listings, has long offered advertisers limited opportunities to appear as paid links on search results pages.


At 11:29 PM, Blogger Ruchi Verma said...

Nice information thank you for giving info


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