Online Ad Budgets Stolen from Traditional

According to a new five-year forecast from Forrester Research, online marketing and advertising will represent 8 percent of total advertising spending in 2010, rivaling ad spending on cable/satellite TV and radio. In addition, 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.

Forrester Research Principal Analyst, Charlene Li, says "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."

Key data points from the report, including data from an online survey of 99 leading marketers and four forecasts, show that:


Total US online advertising and marketing spending will reach $14.7 billion in 2005, a 23 percent increase over 2004.

Search engine marketing will grow by 33 percent in 2005, reaching $11.6 billion by 2010.

Display advertising, including traditional banners and sponsorships, will grow at the average rate of 11% a year to $8 billion by 2010.

64% of respondents are interested in advertising on blogs, 57% through RSS, and 52% on mobile devices, including phones and PDAs.

78% of survey respondents said that they think search engine marketing will be more effective over the next three years.

53% of respondents said TV advertising would become less effective over the next three years.

Only 8% of respondents believe that product placement will become less effective over the next three years.