The Fundamentals of Online Advertising

Internet Advertising Revenues

1.92

4.6

8.27.2

6

18.8

0

2

4

6

8

10

12

14

16

18

20

Year

Re

ven

ue

(in

bil

lio

ns)

The Bust of 2000-2001Internet Advertising Revenue

1.2

1.77

1.95

2.1

1.9

2.2

1.851.861.79

1.7

1.521.46

1

1.5

2

2.5

3rdQ

4thQ

1stQ

2ndQ

3rdQ

4thQ

1stQ

2ndQ

3rdQ

4thQ

1stQ

2ndQ

1999 2000 2001 2002

Re

ven

ue

Terrific Growth

Growth vs. Offline Advertising

Overall ad spending for 2002, up to $96.1 B from an estimated $94.6 B in 2001– a 1.5 % rise

Leading the way for this growth will be Internet advertising…– which will grow 8.8 % over its 2001 total.

The newspaper category, the next best in terms of forecasted growth, is expected to grow 3.1 percent.

CMR forecasts

Globally . . . it’s America

$13.5 B 72% $2.87 B (15%)

$1.7 B (9%)

Rest of the Globe$927 Million

5% eMarketer 2002

But . . .

Online Ad Expenditures Net ad expenditure per online Household

$58

$113

$0

$20

$40

$60

$80

$100

$120

1999 2003Note: TV: $455 Newspaper: $513

Online Ad Expenditures Local spending is increasing quickly

42%

58%

54%

46%

30%

35%

40%

45%

50%

55%

60%

1999 2002

LocalNational

Jay Friesel, EVP, 24/7 Media

Business Categories consumer-related (30%) financial services (15%) computing (15-17%) new media (9-12%) and business services (9-10%)

Web Access More than 152 million people regularly

accessed the Web in 2002. That’s 52 percent of American adults. Women, minorities, and families with

modest incomes continued to surge online.

Online Advertising Success Factors

Four important issues that are critical to successful online advertising:

Targeting

Creativity

Content

Frequency

Click Here

Click Here

Friends Fly

Free

Benefits of Internet Media

PersonalizationAdvertising can be targeted and personalized

for individual consumers (one-to-one marketing)

InteractivityConsumers can interact with ads and can lead

directly to purchase! MonitoringOnline advertising can be monitored both

online and offline (if done right!)

Online Benefits - Monitoring

Forms of Online Advertising

Promotions– Give-aways– Free trial offers

Banner Ads Pop-up Ads Interactive Ads Various other forms

Online Advertising makes up 2-3 % of ad budgets

PromotionThe Dave Matthews Band Web Site in 1998 offered a promotion where you could register for free tickets if you saw this icon on a web page. They moved it around the various web site pages constantly.

Free Trial Offer

The WWW allows for the free trial of some products right after they are advertised.

Computer Programs Videos Music (www.cdnow.com)

Banner Ads The oldest, most common online advertising tool. Surfer clicks on the banner for more information or

to make a purchase click-through rates average about 0.39% but can be

10%+ if targeted properly

Pop-Up Ads Pop-up ads are served when a link to a new page is

clicked. They are self-contained windows that can vary in size The purpose of the pop-up ad is brand awareness more

than actual behavior

Interactive Ads Served like pop-up

ads and resemble them in appearance

Provide the surfer with an activity

a puzzletile game

Little to no growth in 2000s

Other Forms of Online Advertising Sponsorships

Keyword searches Classifieds Email Rich Media

Referrals

Rich Media 44% more effective than TV for brand awareness. 86% more effective for brand recall than television. 44% more effective than magazines. 77% more effective at raising interest than television. More than 5 times as effective than GIF banner ads. Larger ads increase brand recall by 1.5 to 3 times. 6% of online ad total in 2002, 22% by 2007

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The Future of Online Advertising

Sketchy now but a brighter future

Much of the internet spending in 1999-2001 was done by .coms (>65%) that are no longer in existence!

However, traditional consumer goods companies are increasing their online ad expenditures.

Large corporate advertisers tripled their online ad spending last year, to $1.9 million

Attitude toward Internet Ads