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Future is bright for Internet ads -- surveys

Posted by iTech - 2005-12-23

'Tis the season for adjusting online expectations and reviewing what has been hot on the Internet.

JMP Securities on Tuesday raised its global advertising forecast for not only this year but for next year and beyond. The firm now expects the global online ad market to grow at a 25% clip annually for the next five years, up from a previous forecast in the low 20% range.

In the next year the Wall Street firm expects the online ad market to grow to $26.4 billion worldwide and to $33.2 billion in 2007.

Forrester Research, meanwhile, said that those who have the Internet are spending more than 30% of their media time nowadays online, a metric that prompted JMP to increase its market share expectations for Internet advertising in the U.S.

JMP now expects online advertising at $13.2 billion in the United States this year, or 4.7% of total advertising revenue, to soar to $35.9 billion in 2010, when the Internet will command 11.1% of all ad dollars spent.

"We expect large-budget advertisers to continue shifting an increasing percentage of their traditional ad budgets to the Internet," JMP analyst William Morrison said.

Goldman Sachs, Harris Interactive and Nielsen//NetRatings issued their annual holiday online spending report this week as well, indicating that growth in U.S. e-commerce spending is trending at about 16%, at the low end of expectations.

Goldman Sachs analyst Anthony Noto said that video games, CDs and DVDs, "categories that have experienced dampened spending this year," dragging growth down.

From October 29-December 9, Americans spent $18.6 billion buying goods, excluding travel-related items, on the Internet, the report said.

The top product categories are apparel and clothing, consumer electronics, computer hardware and peripherals, books, toys and video games. Movies and music didn't crack the top five.

Benefiting most from holiday e-commerce are Yahoo! Inc. and Google because companies are advertising on their search pages to drive traffic to their Web sites.

Also, eBay should experience above-market growth because it is "relatively insulated from the heightened competition within the e-commerce space." Amazon.com will experience just average growth because of its exposure to video games, DVDs and CDs, Goldman Sachs said.

Nielsen//NetRatings said that Yahoo! in November continued its domination on the Internet with 104 million unique users, topping MSN (91 million), Google (85 million) and Time Warner's America Online (74 million).

Yahoo!'s November uniques gained 10% compared with the same frame a year ago, fueled in part by fantasy football and new services like podcasts, Nielsen//NetRatings said.

It was Apple Computer, though, that boasted the biggest gains among the large-brand Web sites, garnering 31 million unique users, 57% more than the same month a year ago, as consumers flocked to iTunes to buy music and to sites where iPods could be researched and purchased.

Also weighing in with holiday metrics was Leichtman Research Group, which said that more than 40 million homes in the U.S. are broadband Internet subscribers as of the end of the third quarter, 23.2 million by way of cable and 17 million by way of DSL.

LRG said that it is generally bullish on high-definition TV which they said already is in 12% of U.S. households, up from 7% this time a year ago. Consumers paid an average of $1,600 for HDTV, down from $2,400 a year ago.

The firm concludes that "even at reduced prices, HDTV sets are still somewhat of a luxury item, rather than a replacement for the average TV set." Of non-HDTV owners, 11% said they would purchase one next year if the cost goes to $1,000, LRG said.

About 40% of those expecting gifts this holiday season are hoping for electronic gadgets, the Consumer Electronics Assn. said. Topping the list are digital music players. Other hot-ticket items digital cameras, DVD players, Microsoft's Xbox 360 and HDTVs

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