© 2000 Jupiter Communications Jupiter 1 Patrick Keane Vice President and Senior Analyst Jupiter...

© 2000 Jupiter CommunicationsJupiter

1

Patrick KeanePatrick KeaneVice President and Senior AnalystVice President and Senior AnalystJupiter ResearchJupiter Research


2

Agenda:Agenda:

I. Trends and OutlookI. Trends and OutlookII. Future Advertising ModelsII. Future Advertising ModelsIII. Sports MetricsIII. Sports MetricsIV. Anatomy of the Online ShopperIV. Anatomy of the Online Shopper

Jupiter

Online Advertising Through Online Advertising Through 20052005


4

Key QuestionsKey Questions

• What Is the Size of the Online What Is the Size of the Online Advertising Market?Advertising Market?

• What Does the State of the Current What Does the State of the Current Market Imply for Online Advertisers?Market Imply for Online Advertisers?

• How Can Buyers Overcome Increasing How Can Buyers Overcome Increasing Clutter?Clutter?

• How Should Sellers Increase Their Share How Should Sellers Increase Their Share of Advertising Dollars? of Advertising Dollars?


5

US Online Users, 1996-2005US Online Users, 1996-2005

37

60

83

122138

153168

182194

104 64%60%

55%50%

44%

31%

68%

38%

14%22%

0

40

80

120

160

200

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0%

20%

40%

60%

80%

100%

Online Users Percentage of US Population

Source: Jupiter Internet Population Model, (4/00);n=TK, (US Only)

Per

cen

tag

e o

f U

S P

op

ula

tio

nP

erce

nta

ge

of

US

Po

pu

lati

on

Nu

mb

er o

f O

nli

ne

Use

rsN

um

ber

of

On

lin

e U

sers

(in millions)(in millions)


6

Internet Has Already Proven Itself to Internet Has Already Proven Itself to Be a Mass Medium for AdvertisingBe a Mass Medium for Advertising

$0.3

$1.0

$2.1

$3.5

$0

$1

$2

$3

$4

1996 1997 1998 1999Source: Jupiter Internet Advertising Model, (7/00); U.S. Only

On

lin

e A

d S

pen

din

gO

nli

ne

Ad

Sp

end

ing

($ in billions)($ in billions)


7

Buyer Fragmentation Creates Buyer Fragmentation Creates Opportunity for Sellers to Grab Piece Opportunity for Sellers to Grab Piece of the Pieof the Pie

Percentage of Total Online Ad Percentage of Total Online Ad Revenue for Top 15 SitesRevenue for Top 15 Sites

Q4 1999Q4 1999

Source: AdRelevance; Jupiter Analysis

29%29%

71%71%

Percentage of Total Online Ad Percentage of Total Online Ad Spending for Top 15 AdvertisersSpending for Top 15 Advertisers

Q4 1999Q4 1999

79%79%

21%21%

All Other AdvertisersAll Other AdvertisersTop 15 AdvertisersTop 15 Advertisers


8

Despite Skepticism, Advertisers Will Despite Skepticism, Advertisers Will Increase Online SpendingIncrease Online Spending

17%

23%

30%

33%

37%

43%

73%

0% 20% 40% 60% 80% 100%

Newspapers

Outdoor

Radio

Network TV

Cable-TV

Magazines

Internet

Source: Jupiter Executive Survey (8/00), n=32; US only

For Which of the For Which of the Following Media Do Following Media Do

You Plan on Increasing You Plan on Increasing Your Budget for the Your Budget for the

Next 12 Months? Next 12 Months? (Please Check All That (Please Check All That

Apply)Apply)


9

Online Advertising Projected to Online Advertising Projected to Reach $16.5 Billion by 2005Reach $16.5 Billion by 2005

$3.5

$5.3

$7.3

$9.5

$11.9

$14.3

$16.5

8%7%6%5%4%

3%2%

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

1999 2000 2001 2002 2003 2004 2005

0%

5%

10%

15%

20%

25%

Total Online Ad SpendingPercentage of Overall Ad Market

Source: Jupiter Internet Advertising Model, (7/00); US Only



10

The Internet Is on Track to Bypass The Internet Is on Track to Bypass Magazines and Cable-TVMagazines and Cable-TV

$58.9

$52.3

$23.9

$16.5

$16.0

$13.2

$12.7

$2.2

$0 $20 $40 $60 $80 $100

Newspapers

Broadcast TV

Radio

Online Advertising

Yellow Pages

Magazines

Cable-TV

Outdoor

Spending in 2005 ($ in billions)Spending in 2005 ($ in billions)



11

Traditional Advertisers Present the Traditional Advertisers Present the Greatest Opportunity to Ad SellersGreatest Opportunity to Ad Sellers

Automotive $2.1B

Financial Services $2.4B

CPG$1.1B

Computer$1.4B

Media$1.5BApparel

$0.4B

Telecom$0.8B

Travel$1.0B

Electronics$0.3B

Health$0.9B

0%

5%

10%

15%

20%

25%

0% 5% 10% 15%

Sh

are

of

Off

-lin

e S

pen

din

g i

n 2

005

Sh

are

of

Off

-lin

e S

pen

din

g i

n 2

005

Share of Online Spending in 2005Share of Online Spending in 2005Source: Jupiter Internet Advertising Model, (7/00); US Only


12

Increase in Traditional Advertiser Increase in Traditional Advertiser Interest Fuels Healthy GrowthInterest Fuels Healthy Growth

22%

18% 18%

5%6%

5%3%

2%

7%6%

7%5%

9%10%

16%14%

0%

5%

10%

15%

20%

25%

1999 2005

MediaMedia

FinancialFinancialServicesServices

TelcoTelco

ConsumerConsumerGoodsGoods

HealthHealth

Per

cen

tag

e o

f O

nli

ne

Sp

end

ing

Per

cen

tag

e o

f O

nli

ne

Sp

end

ing

Hardware/Hardware/SoftwareSoftware

TravelTravel AutomotiveAutomotive



13

Significance of Online Spending–Significance of Online Spending–2005 2005

Per

cen

tag

e o

f M

arke

tP

erce

nta

ge

of

Mar

ket

Sh

ift

to O

nlin

e b

y 20

05S

hif

t to

On

line

by

2005

Percentage of Online Population Purchasing OnlinePercentage of Online Population Purchasing Online

Computers:Computers:$19.7$19.7

Books,Books,Music, Music,

AndAndVideo:Video:$14.2$14.2

Apparel andApparel andFootwear:Footwear:

$12$12

Home and Home and Garden:Garden:

$13.1$13.1

Grocery and Grocery and Pet Food:Pet Food:

$19.8$19.8

Ticketing:Ticketing:$4.3$4.3

SportingSportingGoods:Goods:

$2$2

FlowersFlowersand Gifts:and Gifts:

$3.4$3.4

Art:Art:$1.8$1.8

Office Office Products:Products:

$4.3$4.3

AutoAutoParts:Parts:$1.9$1.9

Consumer Consumer Electronics:Electronics:

$3.8$3.8

Health and Health and Beauty:Beauty:

$7.2$7.2


50%50%

40%40%

30%30%

20%20%

10%10%

0%0%0%0% 10%10% 20%20% 30%30% 40%40% 50%50% 60%60% 70%70%


14

Consumer Broadband Reaches Consumer Broadband Reaches Critical Mass in 2005Critical Mass in 2005

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005

Cable Modem DSL Satellite Fixed Wireless


1.4m1.4m

11.8m11.8m

13.8m13.8m

Source: Jupiter ProjectionsSource: Jupiter Projections

Ho

use

ho

lds

Ho

use

ho

lds

1.8m1.8m

28.8m28.8m

23.8m23.8m

18.5m18.5m

13.3m13.3m

8.6m8.6m4.8m4.8m

1.8m1.8m

4%9%

14%

20%

26%

31%

36%


15

Incremental Spending Larger than Incremental Spending Larger than Loss from Any Single MediumLoss from Any Single Medium

Direct Marketing

20%

Newspapers14%

TV10%Radio

9%Magazines

6%

Cable4%

Other9%

Incremental28%

Source of Online Ad Spending in 2005Source of Online Ad Spending in 2005

Key FactorsKey Factors•Off-line SizeOff-line Size•Targeting PotentialTargeting Potential•Level of National Level of National AdvertisingAdvertising•Level of Print vs. Level of Print vs. BroadcastBroadcast



16

The Downside: Increase in Clutter The Downside: Increase in Clutter Dilutes Connection to ConsumersDilutes Connection to Consumers

440520

610705

800880

950

0

100

200300

400

500

600

700800

900

1,000

1999 2000 2001 2002 2003 2004 2005

Mar

keti

ng

Im

pre

ssio

ns

per

M

arke

tin

g I

mp

ress

ion

s p

er

Use

r p

er U

sag

e D

ayU

ser

per

Usa

ge

Day



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And Off-line Clutter Is IncreasingAnd Off-line Clutter Is Increasing

650

3,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Source: The Entertainment Economy, Permission Marketing

19851985 19991999Nu

mb

er o

f M

arke

tin

g M

essa

ge

Exp

osu

res

Nu

mb

er o

f M

arke

tin

g M

essa

ge

Exp

osu

res

per

Ave

rag

e C

on

sum

er p

er D

ayp

er A

vera

ge

Co

nsu

mer

per

Day


18

Sellers Must Court Traditional Sellers Must Court Traditional Advertisers, Not Just Dot-ComsAdvertisers, Not Just Dot-Coms

Strong Strong Editorial Editorial

EnvironmentEnvironment

Higher Degree Higher Degree of Hand-holdingof Hand-holding

Promotional Promotional OpportunitiesOpportunities

Flexible Flexible PricingPricing

Online/Off-line Online/Off-line IntegrationIntegration

Proven Proven AccountabilityAccountability

Source: Jupiter Analysis


19

30%29%28%26%24%20%15%

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005

Performance

Publishers Must Maintain Flexible Publishers Must Maintain Flexible Pricing SchemesPricing Schemes

Jupiter Internet Advertising Model, 6/00; U.S. Only; Excludes Classifieds

Per

cen

tag

e o

f O

nli

ne

Med

ia B

uy

Per

cen

tag

e o

f O

nli

ne

Med

ia B

uy

Sp

end

ing

Sp

end

ing


20

In SummaryIn Summary

• Capital Constraints Increase Advertiser Capital Constraints Increase Advertiser Focus on Efficiency Focus on Efficiency

• Online Advertising Is Projected to Reach Online Advertising Is Projected to Reach $16.5 Billion by 2005$16.5 Billion by 2005

• Advertisers Must Outrun the Increase in Advertisers Must Outrun the Increase in Clutter by Using a Diverse Arsenal of Clutter by Using a Diverse Arsenal of TacticsTactics

• Publishers Must Satisfy Advertisers’ Publishers Must Satisfy Advertisers’ Demand for Ways to Break Through the Demand for Ways to Break Through the ClutterClutter

Jupiter

Online Sports: The Model Online Sports: The Model for Convergent Businessesfor Convergent Businesses

Jupiter

The Rule for Most Online The Rule for Most Online Businesses is Channel Businesses is Channel Shift & Cannibalization . . . Shift & Cannibalization . . . Sports Shatters This Rule Sports Shatters This Rule


23

Online Sports:Online Sports:Incremental Opportunity Incremental Opportunity

• Broadband Will Not Affect Sports in the Near Broadband Will Not Affect Sports in the Near TermTerm

• $3b in Commerce, but Categories Reflect $3b in Commerce, but Categories Reflect Complementary Dynamic Complementary Dynamic

• Sports Media Revenues Will be Incremental Sports Media Revenues Will be Incremental • Content Consumption = Utility and InformationContent Consumption = Utility and Information• League Revenue Diversification and Customer League Revenue Diversification and Customer

OwnershipOwnership


24

Sports Popularity Proven Sports Popularity Proven RankRank AOL ChannelAOL Channel Unique (millions)Unique (millions) Reach (%)Reach (%)

11 NewsNews 14.114.1 19.419.4

22 EntertainmentEntertainment 11.311.3 15.515.5

33 ShoppingShopping 10.610.6 14.614.6

44 Personal FinancePersonal Finance 10.110.1 13.913.9

55 SportsSports 8.88.8 12.112.166 ComputingComputing 8.88.8 12.112.1

77 GamesGames 8.58.5 11.611.6

88 Research and LearnResearch and Learn 8.48.4 11.511.5

99 TeensTeens 7.77.7 10.610.6

1010 Interest Interest 6.76.7 9.29.2Source: Media Metrix, 1/00


25

And Growing . . . And Growing . . .

RankRank AOL ChannelAOL Channel Unique Unique (millions)(millions)

Reach (%)Reach (%)

11 NewsNews 15.715.7 19.7%19.7%

22 EntertainmentEntertainment 14.614.6 18.2%18.2%

33 SportsSports 12.312.3 15.4%15.4%44 Personal FinancePersonal Finance 11.311.3 14.2%14.2%

55 Women’sWomen’s 10.210.2 12.8%12.8%

6 6 ComputingComputing 9.49.4 11.8%11.8%

77 TravelTravel 9.39.3 11.6%11.6%

88 ShoppingShopping 8.68.6 10.8%10.8%

99 InterestsInterests 8.58.5 10.6%10.6%

1010 WorkplaceWorkplace 5.75.7 7.1%7.1%Source: Media Metrix, 1/00


26

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Jan-00

Feb-00

Mar-00

Apr-00

May-00

Jun-00

Jul-00

Aug-00

Sep-00

Oct-00

Nov-00

Dec-00

ESPN*

SportsLine.com Sites*

NFL.com

NBCOLYMPICS.com

CNNSI.com

FoxSports.com

Sandbox.com

NASCAR.com

FansOnly.com

MajorLeagueBaseball.com

SportingNews.com

Rivals.com

NBA.com

Gorp.com

PGATOUR.com

Quokka.com

NHL.com

WNBA.com

Sports Content Site Reach ChartSports Content Site Reach Chart

Source: Media Metrix, 1/00

Jupiter

Ticketing Leads Commerce Ticketing Leads Commerce Category RevenueCategory Revenue


28

Online Sports Commerce MarketOnline Sports Commerce Market

$0.6

$1.0

$1.8

$3.0

$0.3

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

1999 2000 2001 2002 2003

Sports


Source: Jupiter/NFO,1/00


29

Ticketing Leads Category RevenuesTicketing Leads Category Revenues

$0.4 $0.6

$0.4

$1.0

$0.2

$0.1

$0.5

$0.3

$0.1$0.1

$0.2

$0.1

$0.2$0.3

$0.4

$0.7

$1.1

$0.0$0.3$0.6$0.9$1.2$1.5$1.8$2.1$2.4$2.7$3.0

1999 2000 2001 2002 2003

Sporting Goods Apparel Footwear Ticketing

($ in millions)($ in millions)

Source: Jupiter


30

Narrowband Reality PreventsNarrowband Reality PreventsViewing ReplacementViewing Replacement

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005

Cable Modem DSL Satellite Fixed Wireless


1.4m1.4m

11.8m11.8m

13.8m13.8m

Source: Jupiter Projections

Ho

use

ho

lds

Ho

use

ho

lds

1.8m1.8m

28.8m28.8m

23.8m23.8m

18.5m18.5m

13.3m13.3m

8.6m8.6m4.8m4.8m

1.8m1.8m

4%9%

14%

20%

26%

31%

36%


31

Broadband Still Fails to Resonate Broadband Still Fails to Resonate With Online NovicesWith Online Novices

2.26

2.04

1.81

0.0 0.5 1.0 1.5 2.0 2.5

Veterans (>2 yrs.)

Intermediate (1-2yrs.)

Newbies (<1 yr.)

Likelihood of Getting Home Broadband Service over the next 12 months, Ranked from 1 (very unlikely) to 5 (very likely).

Source: Jupiter Consumer Survey, N=2,143


32

1%2%

4%6%7%7%7%

14%19%

25%27%

35%

0% 10% 20% 30% 40%

Which of the following Which of the following services do you use services do you use while visiting sports while visiting sports oriented Web sites?oriented Web sites?

Source: Jupiter/NFO, 2/00 n=1,478Source: Jupiter/NFO, 2/00 n=1,478

Sports Media Driven by Sports Media Driven by Commodity Data and Utility Commodity Data and Utility

Chat w/ StarsChat w/ StarsChat w/ FansChat w/ Fans

Simulcasted Web ContentSimulcasted Web ContentFantasy LeaguesFantasy LeaguesVideo HighlightsVideo Highlights

Purchase TicketsPurchase TicketsListen to EventsListen to EventsContests/GamesContests/Games

ShoppingShoppingEvent Info.Event Info.

Read about SportsRead about SportsScores/Stats InfoScores/Stats Info

Jupiter

Convergent Programming: Convergent Programming: Exploiting the Sports TV Exploiting the Sports TV ConnectionConnection


34

Sports Benefits Most From Sports Benefits Most From Convergent Viewing Convergent Viewing

Never:47%

Often:18%

Sometimes:35%

How often do you watch TV while you are online?

Source: Jupiter/NFO, Spring/99 N = 3,000


35

Tenure Increases IntensityTenure Increases Intensity

30% 33% 38%

11%17%

22%

0%

10%

20%

30%

40%

50%

60%

70%

Light Medium Heavy

Sometimes Often How often do you watch TV while Online?

Per

cen

tag

e o

f R

esp

on

den

ts

Source: Jupiter/NFO, Spring/99 N = 3,000


36

4%

8%

8%

9%

12%

14%

21%

28%

37%

53%

0% 20% 40% 60%

What factors would What factors would motivate you to motivate you to purchase sporting purchase sporting goods or sports-related goods or sports-related merchandise and/or merchandise and/or apparel online?apparel online?

Source: Jupiter/NFO, 2/00 N = 1,478

Big Surprise: Consumers Driven by Price

Expert Product recommendation

Same day delivery/in-store pickup

Specific sports info.

Customer service

Friend's recommendation

Familiar brands

Physical store returns

Deeper selection thanphysical store

Would not purchase online

Better prices than physical store


37

SummarySummary

• Consumers Crave Utility, Not Consumers Crave Utility, Not EntertainmentEntertainment

• Sports Programming Should Be Sports Programming Should Be SupplementalSupplemental

• League, Team, and Media Revenues Will League, Team, and Media Revenues Will Be IncrementalBe Incremental


38

Anatomy of the Online Anatomy of the Online Shopper Shopper


39

US Online Retail Revenues, 1996-2005US Online Retail Revenues, 1996-2005

$0 $2 $6

$24$36

$52

$71

$93

$118

$12

$0

$20

$40

$60

$80

$100

$120

$140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: Jupiter Internet Shopping Model, (9/00);(US Only)

On

lin

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pen

din

gO

nli

ne

Sp

end

ing



40

Online Retail Spending by Age Online Retail Spending by Age Group, 1999-2005Group, 1999-2005

2% 2% 3% 3% 5% 6% 7%

58% 61% 63% 63% 63% 63% 62%

38% 34% 32% 31% 28% 27% 26%

2% 2% 2% 3% 4% 4% 4%

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005

Seniors (65+) Adults (35-64) College and Young Adults (19-35) Teens and Kids

Per

cen

tag

e o

f O

nli

ne

Sal

esP

erce

nta

ge

of

On

lin

e S

ales

Source: Jupiter Internet Shopping Model, (9/00); (US Only)


41

Online Retail Spending by Income Online Retail Spending by Income Group, 1999-2005Group, 1999-2005

6% 6% 7% 8% 9% 9% 9%14% 15% 16% 17% 18% 18% 18%

30% 31% 31% 30% 30% 30% 29%

48% 46% 44% 42% 41% 40% 40%

4%3%3%3%2%2%2%0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005

Under $15K $15K-$30K $30K-$50K $50K-$75K $75K and over

Per

cen

tag

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f O

nli

ne

Per

cen

tag

e o

f O

nli

ne

Sp

end

ing

Sp

end

ing



42

Online Retail Spending by Gender, Online Retail Spending by Gender, 1999-20051999-2005

44% 49% 50% 52% 52% 53% 53%

56% 51% 50% 48% 48% 47% 47%

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005

Female Male

Per

cen

tag

e o

f O

nli

ne

Sp

end

ing

Per

cen

tag

e o

f O

nli

ne

Sp

end

ing



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Online Commerce Buyers*, 1996-2005Online Commerce Buyers*, 1996-2005

48

64

78

91

104

33

117

10519

17%14%

32%

60%

23%

40%46%

51% 54% 57%

0

20

40

60

80

100

120

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0%

20%

40%

60%

80%

100%

Online Buyers Percentage of Online Population

Per

cen

tag

e o

f O

nli

ne

Po

pu

lati

on

Per

cen

tag

e o

f O

nli

ne

Po

pu

lati

on

Nu

mb

er o

f O

nli

ne

Bu

yers

Nu

mb

er o

f O

nli

ne

Bu

yers


Source: Jupiter Internet Shopping Model, (9/00);n=TK, (US Only)* Includes travel


44

Users’ Shopping Behavior 1999-2005Users’ Shopping Behavior 1999-2005

31%40% 46% 54% 57% 60%

22% 21% 19% 18% 17% 16% 15%

51%

25%27%29%35% 31%

47%40%

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005

Buyers Browsers Nonbuyers

Per

cen

tag

e o

f O

nli

ne

Use

rsP

erce

nta

ge

of

On

lin

e U

sers

Source: Jupiter Internet Shopping Model, (9/00);n=TK, (US Only)


45

Commerce Spending* per Buyer, Commerce Spending* per Buyer, 1996-20051996-2005

$83

$207$294

$495$573

$661$776

$895$1,011

$374

$0

$200

$400

$600

$800

$1,000

$1,200

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Sp

end

ing

per

Bu

yer

Sp

end

ing

per

Bu

yer

Source: Jupiter Internet Shopping Model, (9/00);n=TK, (US Only)* Includes travel


46

ThanksThanks

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