Towards
the end of 2004, people's minds were centered on the question
of what 2005 will bring. It’s now 2005, but unfortunately
it’s too soon to answer that question. What can be known
though is how the industry fared in 2004. The answer as most
people already know is that the industry fared quite well.
Throughout the year, many reports tracked the progress of
online ad spending. Most of those estimates peg online ad
spending for 2004 around $7.5bn to $8.5bn dollars. How much
is spent for advertising online comes down to not just how
many people are online but also perhaps how well integrated
the internet is into their lives. There are many ways to
gauge the latter, but one of the more interesting and
seasonally appropriate is looking at how much money the
internet users themselves spent online.
https://www.lynxtrack.com/signup.php
The roughly $8bn spent for
online advertising in 2004 represents a 30% increase from
the previous year’s total, and is significantly greater than
the 5% growth seen for the other areas of ad spending.
Similarly, consumer spending online also grew by upwards of
30% in 2004, hitting a record of close to $9bn during the holiday
season alone. What that number suggests, besides overall
improvements in sites’ ability to service market needs, is
that people are more comfortable spending money online. If
people are comfortable spending money online, that suggests
not only that they are comfortable being online, but have
integrated the medium into their lives. That could explain
why internet advertising growth outpaced the percentage
growth of new internet users. User adoption and integration
could be the key trend that ultimately drives growth.
A sign that internet
integration has increased comes from an unlikely source, the
recent natural disaster. December 26th’s tsunami,
unimaginable in its scope and resulting devastation, helped
show not the power of the internet but the value of the
internet. In the wake of the disaster, the internet not only
spread word of the events but was doing its part to help, and
in ways not possible in other mediums. This is illustrated
in two examples. The first example speaks to the internet’s
ability to spread information, the second people’s ability
to act on information.
Among those impacted by the
tsunami were tourists vacationing in places such as
Thailand’s Phuket Island. In one instance, a young boy’s
parents died, and he was in a foreign hospital with those
taking care of him not knowing his nationality or the
language to speak to him. His grandfather in Sweden saw the
picture of the boy, and they were able to be united. Without
the internet, the ability for this boy’s to be found by his family might not
have happened, and if it did, it could have easily taken
weeks or even months, not days. The amount of time saved
along with the emotional pain saved is remarkable.
The second example of the
value of the internet relates to financial aid. As people
use the internet for information, arguably the internet’s
chief value proposition, users can take immediate action.
Amazon.com, for example, placed a link to the American Red
Cross on its page in the wake of the disaster and by midday
in the first day of doing so, they had raised $8 million
dollars. That users could, within a few clicks, act on the
information they saw, that millions could be raised in a
matter of hours all by the placement of a simple link, i.e.,
no additional costs or time needed, really displays the
value of the net. Users gave points to the increased
level of comfort and adoption – all of which wouldn’t have
happened as quickly or in such scale several years ago.
Ultimately, it’s the value of
the internet that drives our market opportunity. In 2004,
online ad spending mirrored very closely not only the total
amount spent by users online during the holiday season but
also the percentage growth rate. It will be interesting to
see how these numbers compare for future years. As can be
inferred, online ad spending is really the result of a wide
variety of factors. Trying to find real-time insights into
those factors can hopefully prove to be more than an
academic exercise but one that will help signal areas of
interest and opportunity for 2005 and beyond.
Jay Weintraub
