Interactive ads forecast to grow rapidly

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By: Wise Marketer Staff |

Posted on August 22, 2003

Although interactive advertising has been slow to pick up, advertising agencies are set to increase their spending, and US interactive advertising revenue will exceed US$8.6 billion by 2005, according to GartnerG2. And, this year alone, interactive advertising is expected to reach US$8.43 billion.

By interactive advertising, GartnerG2's research refers to all forms of online, wireless, and interactive TV advertising. This definition includes banners, sponsorships, e-mail, keyword searches, referrals, 'slotting fees', classified ads, and interactive TV commercials.

Although chief media buyers at advertising agencies are using interactive advertising more frequently, 60% claim that interactive advertising is not as effective as traditional media, according to a recent telephone survey of 52 US media agencies by GartnerG2 and the Interactive Advertising Bureau (IAB).

According to the survey, chief media buyers perceive the primary strength of interactive advertising to be "to drive sales and traffic". This contrasts with their perception that traditional media's primary strength is "to increase brand awareness" and "to position products".

Shift needed
"A fundamental shift in these perceptions needs to occur for interactive advertising to substantially grow its share of the overall ad budget," said Denise Garcia, principal media and advertising analyst for GartnerG2. But this shift may not be as difficult as it seems. While many agencies are still sceptical they do plan to increase their spending on interactive advertising.

"Some of this increase in spending could be due to greater total ad spending and higher rates charged for targeted advertising, which is now more readily available due to technology improvements," added Garcia. "Either way, once agencies increase their spending, they will also increase their experience levels. And experience is the primary reason agencies develop positive perceptions toward interactive advertising."

Propensity to recommend
According to the survey, large agencies (those with US$500 million or more in gross billings) are more likely to recommend interactive advertising than small agencies (those with less than US$50 million).

Among large agencies, 67% recommend interactive media. If they are not already recommending use of the internet, 5% plan to do so by the end of 2003, and 10% plan to do so after 2003.

Small agencies were not as enthusiastic in their recommendations, with only 53% currently recommending interactive media, while 19% are planning to do so by the end of 2003, and a further 10% planning to do so after 2003.

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