Decreasing dot-com spending will only temporarily pause online marketing’s growth. According to a new Report from Forrester Research, Inc. (Nasdaq: FORR), traditional US companies using digital marketing — multifaceted marketing campaigns which integrate online advertising, promotions, and email strategies — will spend $63 billion on it annually by 2005. Online advertising alone will rise to $42 billion worldwide in the same time frame.

“Online advertising’s current swoon won’t last,” according to Jim Nail, senior analyst at Forrester. “The dot-com tide has begun to ebb — while dot-coms accounted for 69% of digital marketing in 2000, by 2005, traditional advertisers will embrace it, driving 84% of digital marketing. But the recovery won’t begin until marketers master integrated digital marketing techniques.”

As traditional advertisers learn that online advertising is just the first stage of a campaign, they will augment budgets for later-cycle activities like promotions and email, boosting US digital marketing from $11 billion in 2000 to $63 billion in 2005 — representing 12% of all marketing dollars. Luring customers along the marketing cycle with targeted offers will propel the growth of promotions 42% annually, and more than $6 billion will be spent on email marketing in 2005.

Traditional advertisers will embrace digital marketing in three waves. The early movers — companies that started advertising online before 1999 and include sellers of highly considered products or services like autos and financial services — accounted for 16% of offline marketing in 2000. But because they plan to shift 25% of the overall marketing budget online over the next five years, they will represent 32% of all digital marketing spending by 2005.

Mainstream advertisers — such as Daimler Chrysler — have hung back and waited to see how the market develops. As increased spending by their early adopting competitors becomes evident, these companies will begin to market online in 2002. Because mainstream advertisers are slow to the market, they will spend only 10% of their marketing budgets online. However, 10% of their vast marketing will still equal 41% of all digital marketing by 2005.

Manufactures of low-consideration products, such as soft drinks and household cleaners, began dabbling online in 2000 and will start to take the Net more seriously in 2002. With their online budgets representing a lower percentage of the total marketing budget, this group will account for only 11% of digital marketing in 2005.

While digital marketing takes hold in the US, the rest of the world will not experience the eclipse of online advertising for another 18 months. Thus, on a worldwide basis, Forrester looked at online advertising on its own and found that while regions outside of North America represented only 16% of overall online advertising in 2000, that number will grow to 27% of the $42 billion worldwide online advertising market in 2005.

European online advertising will grow ninefold to $6 billion by 2005. Consumer eCommerce will drive the European online advertising market as it balloons from €8.5 billion to €174 billion in 2005. But high access charges, lower technology adoption rates, and lower overall per capita ad spending all stem the growth of online advertising when compared with the US.

Asia-Pacific online ad spending will rise to $4.5 billion in 2005 — while Japan and Australia continue to power 80% of the region’s advertising market. But growing technology penetration in countries with healthy traditional advertising markets will fuel the region’s growth.

In 2000, Latin America was frenzied with a flood of foreign investment, the spread of free ISPs, and the emergence of dot-com entrepreneurs, which set off a temporary Internet boom. However, despite the dot-com meltdown, online ad spending in Latin America will continue to grow to $1.2 billion by 2005.

For the Report “Online Advertising Eclipsed,” Forrester surveyed 59 marketers and found that online marketing per company will rise from $550,000 this year to $1 million in 2003.