Study: Online Ad Sales To Pass TV Ads by 2005

According to a study released Monday by New York-based media research and consulting firm The Myers Group LLC, U.S. advertisers will spend more on advertising online than they will on network broadcast television by 2005.

The study suggests that U.S. advertisers will spend $32.5 billion (US$) to advertise their products over the Internet by 2005, compared to just $19.2 billion on network television broadcast advertising and $23.8 billion on network cable advertising.

“We see online advertising as being the new engine that is speeding other media rather than draining them,” Myers Group CEO and chief economist Jack Myers told the E-Commerce Times Tuesday. “We’re looking at online ad revenues growing by 80 percent this year, 50 percent in 2001, 60 percent in 2002, 60 percent in 2003, 40 percent in 2004 and 40 percent in 2005. After that we’re looking at a sustained growth of 20 to 40 percent for another five or six years.”

The study reports that worldwide online ad spending will grow from $5.25 billion this year to $45.5 billion in 2005. The U.S. will continue to have the lion’s share of the ad revenues in 2005, but it will be a diminishing percentage of the total, down to 71 percent from 82 percent today.

Not Out of Line

The Myers numbers are large, but are not out of line with other projections for online advertising in the same period. The eAdvertising Report, produced by eMarketer and Advertising Age magazine, predicts $13.3 billion in U.S. online ad spending in 2003.

Myers said the broadcast network revenues are limited by a “dramatically decreasing” viewership. “The fact that it’s [broadcast network advertising revenue] growing over this period is really the story,” he said, pointing out that the cumulative average prime time rating of the four broadcast networks has dropped from 43 in 1992 to 27 this year and is expected to hit 18 by 2005.

“The fact that they’re able to sustain significant revenue growth while losing a third of their audience is a significant story,” he said.

Broadcast Leads the Pack Today

The Myers Group estimates broadcast network ad sales at $16.8 billion in the U.S. this year, compared with $10.1 billion for cable network and $4.3 for online advertising. By 2005, the report says, broadcast network ad expenditures will be about $19.2 billion, cable will be $23.8 billion and online will amount to $32.5 billion.

Although television will suffer some losses to the Internet, Myers said the biggest losers will be sales promotion and direct mail advertising. He added that interactive television ads are another growing medium in the next few years.

“We’re projecting interactive television advertising in 2004-2005 to be $9 or $10 billion,” Myers says. “We haven’t really factored in where that’s going to come from, but we don’t see it as coming from cable. It’s kind of impossible to see the landscape yet.”