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Forrester Research Releases US Online Advertising And Marketing Forecast — Market To Reach $26 Billion By 2010

Survey Finds That 84 Percent Of Marketers Plan To Increase US Online Ad Budgets In 2005

Cambridge, Mass., May 3, 2005 . . . Almost half of marketers plan to decrease spending in traditional advertising channels like magazines, direct mail, and newspapers to fund an increase in online ad spending in 2005. Total US online advertising and marketing spending will reach $14.7 billion in 2005, a 23 percent increase over 2004. According to a new five-year forecast from Forrester Research, Inc. (Nasdaq: FORR), online marketing and advertising will represent 8 percent of total advertising spending in 2010 — rivaling ad spending on cable/satellite TV and radio.

"Despite significant changes in consumer behavior, there is a large disparity between the amount of time consumers are spending online and the money marketers are spending trying to reach them online," says Forrester Research Principal Analyst Charlene Li. "When at-work Internet use is taken into consideration, online consumers spend more than one-third of their time online — roughly the same amount of time they spend watching TV. Yet marketers spend only 4 percent of ad budgets online versus 25 percent on TV."

While marketers surveyed believe that online advertising channels, such as search engine marketing, online display ads, and email marketing will continue to become more effective relative to traditional channels, barriers that include a lack of online advertising standards and hands-on experience have kept marketers from fully embracing online channels.

The report includes data from an online survey of 99 leading marketers and four forecasts: US Online Advertising And Marketing Spending, US Search Marketing Spending, US Online Classifieds Advertising, and US Email Marketing Spending.

Key data points include:

• Search engine marketing will grow by 33 percent in 2005, reaching $11.6 billion by 2010. Display advertising, which includes traditional banners and sponsorships, will grow at the average rate of 11 percent over the next five years to $8 billion by 2010.
• New advertising channels will draw interest and spending from marketers. Sixty-four percent of respondents are interested in advertising on blogs, 57 percent through RSS, and 52 percent on mobile devices, including phones and PDAs.
• Marketers are quickly losing confidence in the effectiveness of traditional advertising channels and feel that online channels will become more effective over the next three years. Seventy-eight percent of survey respondents said that they think search engine marketing will be more effective, compared with 53 percent of respondents who said TV advertising would become less effective.
• The only nondigital advertising channel to reach the same level of confidence as online channels with marketers is product placement — only 8 percent of respondents believe that product placement will become less effective over the next three years.

"US Online Marketing Forecast: 2005 To 2010" is available to WholeView 2™ clients and can be found at www.forrester.com.

Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Business, marketing, and IT professionals worldwide collaborate with Forrester to align their technology investments with their business goals. Forrester offers products and services in four major areas: Research, Data, Consulting, and Community. Established in 1983, Forrester is headquartered in Cambridge, Mass. For additional information, visit www.forrester.com.

Contact:

Erica Cantwell
Manager, Public Relations
Forrester Research
+1 212/672-1757
ecantwell@forrester.com