Online ad spend set to plummet

Online advertising spend for the coming year will be over $1.5bn lower than previously expected.

This is yet another indication that advertisers are tightening their grip as the economic downturn takes hold.

Internet research company Jupiter MMXi has reduced its expectations for online advertising by a fifth. It is now forecasting spending of $5.7bn this year, down from the $7.3bn previously forecast.

A spokeswoman for Jupiter said marketers' inability to evaluate the effectiveness of online advertising has contributed to the current cut in spending.

However, it predicts that spending will bounce back over the next few years, reaching more than $15bn by 2006 - although it now reckons the figure for 2005 will be $12.9bn, compared with earlier estimates of $16.5bn.

Online advertising will account for seven per cent of the total advertising market in 2006, up from three per cent in 2000 (assuming Jupiter doesn't change its forecasts again).

Financial services companies will account for the majority of online ad spending by 2006, at $2.1bn.

Jupiter added that automotive and media companies will also be big spenders, with $2bn and $1.6bn respectively.

The majority of growth in the online marketing space during the next few years will come from a broad range of digital marketing options, such as email, promotions and coupons, instead of straightforward advertising on websites, Jupiter claims.

In addition, Jupiter believes that spending on digital marketing will exceed that of online advertisements and reach $19.3bn by 2006, from an expected $2bn in 2001.