Goldman Sachs adds their own numbers to recent reports that advertising spending on the Internet will take a bullish ride to record highs. Providing a lower estimate than Forrester Research and eMarketer, Goldman Sachs expects 2005 ad spending to reach $12.3 billion.
Citing the growth of broadband access, which is estimated to reach 59% of homes with Internet access, the investment bank believes that the ease of downloading video and music will catch the attention of advertisers and may take a chunk of money away from television ads. Goldman Sachs expects online advertising will account for 4.4% of total US advertising.
“Advertisers have made the transition from testing the online platform to making it a permanent part of their marketing mix, owing to the increased effectiveness and measurability of the online channel and advertisers’ increased frustration with other media platforms, such as TV and print,” according to the report.
The $12.3 billion is decidedly lower than Forrester Research’s prediction that ad spending will peak at $14.7 billion in 2005, as well as eMarketer’s prognostication of $12.9 billion.
At the very least, the 25 percent increase in ad spending reflects a favorable shift to the World Wide Web.
According to the Interactive Advertising Bureau, consumer advertisers led all industry categories in 2004, accounting for 49 percent of revenues. Computing advertisers accounted for 18 percent, followed by Financial Services at 17 percent, Telecommunications at 4 percent and Pharmaceutical & Healthcare at 6 percent. Within the consumer category the biggest sub-categories are retail (40 percent of the consumer category), automotive (19 percent), leisure (16 percent), entertainment (13 percent) and package goods (7 percent.)
Paid search was the method of choice for advertisers in 2004, up 35 percent from 2003, while display and sponsorship advertising declined by 4 percent.
“The revenue results reported for 2004 confirm a very healthy environment for online advertising, for both direct marketers seeking immediate performance results, as well as brand advertisers looking to create or enhance an image, product or service. Moreover, the Internet is the only medium to adopt a global standard for impression measurement, intended to simplify the buying and selling process for online advertising,” said Pete Petrusky of PricewaterhouseCoopers LLP.