Evidence of a Turning Tide. emarketer. IAB Annual Meeting September 8, 2003

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1 Evidence of a Turning Tide emarketer IAB Annual Meeting September 8, 2003

2 Aggregate Filter Organize Analyze 1,200 sources

3 What we ll cover: I. Where have we been? #1. Internet users #2. Time spent online II. III. Where are we going? The 6 pillars of growth -- MORE: #3. Shopping & buying #4. Broadband & Digital TV #5. Rich media #6. Relevancy

4 II. Where have we been? Convincing traditional advertisers that online advertising works

5 I heard the Internet is the most measurable medium ever! So, how big was the online ad market last year?

6 Pick a number, any number Year 2002 Projections (billions) $4.8 Lehman Bros $2.8 Initiative Media $4.0 Myers Group $5.6 Jupiter $4.9 McCann $6.6 $6.4 Forrester JP Morgan $6.0 Goldman Veronis$6.0 $6.3 Sachs PwC Suhler $6.1 IAB/PwC CIBC $6.0 emarketer Morgan $5.7 Stanley CMR $7.0 Kagan $7.5 Zenith Media $7.0 Smith Barney $8.6 Corzen Source: emarketer, 2003 $8.7 Gartner G2

7 II. Where are we going?

8 September 5, 2003 We think that advertising is on it s way back. --David Wyss, Chief Economist, Standard & Poor s

9 S&P (Sept 03): 4.8% Merrill Lynch CMR reports 6.8% growth for 1 st half

10 Just Released! Among 500 media planners surveyed in August, has your demand for ad media Decreased 18% Increased 39% Remained even 43% Source: MediaPost/Insight Express, Sept 8, 2003

11 Online ad spending growth in % CIBC Veronis 10.0% CMR/TNS 7.4% JP Morgan 7.2% Jupiter Research 5.0% McCann 5.0% emarketer 4.8% PwC Goldman 4.8% 0.7% GartnerG2 4.7% Myers 2.6% Source: emarketer, 2003

12 Removing the AOL factor +4.8% $6.0 B $6.3 B Source: emarketer, 2003, IAB, 2003; Goldman Sachs, 2003 (AOL)

13 Don t forget the AOL factor Vs. Total 4.9% $6.0 B (AOL) +15% (AOL) $6.3 B

14 Online ad spending growth in 2004? Lehman Jupiter Myers JP Morgan emarketer PwC Veronis GartnerG2 7.9% 6.1% 6.0% 4.6% 11.3% 25.0% 21.0% 20.0% Total Media = 6.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

15 US online ad spending (in billions) $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 $8.2 $7.2 $6.8 $7.2 $6.3 $6.0 $4.6 $ Source: emarketer, 2003; IAB, 2003

16 The 6 Pillars of Growth for Online Advertising.

17 #1. There are 155 million Internet users, and 140 million are active, monthly users.

18 Millions online in 2002 Arbitron etforecasts Pew Research Jupiter emarketer comscore Harris Poll NetRatings MediaMark Kagan Source: emarketer, 2003; with 2002 baseline from Dept of Commerce, 2003

19 Out of 155 million users in total Daily (52.7%) = 81.7 Several times per week (22.2%) = 34.4 About one time per week (8.0%) = 12.4 Monthly (7.8%) = 12.1 Less than 1X/month (14.1%) = MM monthly users Total Online, per emarketer = Source: emarketer (total number online and calculation of segment sizes), 2002; Conference Board (percentage allocations of frequency), based on study conducted by NFO WorldGroup & Forrester Research among 7,000 households, 2002

20 emarketer s active user base of 140 million is supported by other researchers Comparison with Top Panel Measurement Firms and Harris Poll* comscore Nielsen//NetRatings M M** M emarketer Harris Poll M M Source: emarketer, 2003 *Harris Poll was conducted in Nov-Dec 2002 among 2,033 Americans **Nielsen//NetRating s figure of 131 million does not include university users. Adding the 9.5 million university users measured by comscore yields a total user figure of million

21 The total Internet user audience grew by 8.5% in % +8.5% Source: emarketer, 2003; baselines in 2000 and 2001 from Dept. of Commerce, 2002

22 comscore data supports a growth rate of over 8% for the total Internet user base December 01 vs. 02 growth was 8.7% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Millions Source: comscore Networks, 2003 (based on total at work/at home/at university users)

23 Comparative HH penetration rates in 02 (= REACH) The two factors that seem to drive Internet Radio & Televisionuse the most are income 98% and educational levels. Magazines 84% Cable TV ~ 67% Internet 2004: 59% 68% Newspapers 55% --Tom Spooner, Pew Internet & American Life Project Sources: emarketer (Internet); Nielsen Media Research (television); RADAR, Fall 2000 (Radio); Television Bureau of Advertising, 2003 (Cable); MRI Spring 2002 (magazines); Scarborough Research/NAA Research, Spring 2002 (newspapers)

24 Internet penetration goes up with HH income level 100.0% 80.0% 60.0% 40.0% 20.0% Tower Group.85% Pew Research.82% Scarborough Research 79% % of US HHs with Net Access 79.0% 57.0% 67.0% 44.0% 33.0% 25.0% 0.0% <15K $15K K $25K - $34.9K $35K - $49.9K $50K - $74.9K $75K+ Source: US Dept of Commerce, February 2002

25 While African-Americans & Hispanics are still underrepresented online, they re catching up fast White Total Pop (Census) 75.1% emarketer (Dec 2002) 78.4% Jupiter (HHs 02) 78.6% Arbitron (Jan 03) 78.0% Black 12.3% 9.2% 10.2% 9.0% Hispanic 12.5% 7.1% 7.5% 7.0% Asian 3.6% 4.6% 3.7% N/a Source: emarketer, 2003; various, as noted

26 #2. They spend an average of 65 minutes per day online.

27 Average number of minutes Internet Sweet users Spot spend online per day ~ 65 mins AOL/Roper (Mar '03) NetRatings (Jan '03) UCLA (Jun '02) Arbriton (Jan '03) Harris (Apr '02) comscore (Jan '03) Veronis (2002) Notes: 1)Veronis figure based on home usage only, and assuming a user penetration rate of 60%; 2) NetRatings changed their methodology to include desktop apps in 10/02; 3) AOL/Roper data for adults only Sources: emarketer, 2003 (including all locations)

28 WARNING! Averages can be misleading. Many Internet users spend far more than 65 minutes per day online Broadband users At work users Experienced Internet users Upper income/affluent Teens

29 For business decision-makers, the Internet dominates all other media % of Business Decision-Makers Who Use Media for At Least 2 Hours Per Day Mon.-Fri. 50% 40% 30% 20% 10% 0% 41% 32% 23% 5% 3% Internet TV Radio Newps Mags Source: MORI Research and Washingtonpost.com, Sept 2002

30 Teens now spend more time online than with television (avg hours/day) TV Grunwald* 3.1 Harris 1.9 Web Grunwald* 3.5 Harris 2.4 Sources: 1) Grunwald Associates, March 2003 (teens aged years); includes and IM. 2) HarrisInteractive/Teenage Research, July 2003 (teens aged years)

31 And for some dayparts, the Internet beats all other media % Using Medium During 8:00-11:00 am 80% 60% 40% 20% 59% 34% 16% 7% 0% Internet Radio Newspaper TV Source: MORI Research, January 2003 (among Internet users)

32 comscore panel measurement data shows growth has slowed avg mins per visitor per day December 01 vs. 02 growth = 12.5% Jan '02 FY 02 vs. Jan - July 03 = 2.2% Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec '02 Mins per user Jan '03 Feb Mar Apr May Jun Jul Source: comscore Media Metrix, 2003 (based on a panel of 1.5 million active Internet users

33 % Decrease in TV/Mag/Nwspr Use Due to Web TV Television Mags Newspapers Magazines Newspapers Arbitron (9 02) -37% -27% -31% Gartner G2 (10 02) -20% -15% -20% Scarborough (5 02) -23% -20% -15% Pew (6 02) -37% N/a -18% UCLA (11 02) -30% -38% -36% Source: emarketer, 2003

34 Some say online s not getting its fair share!!! 8.8% 4.4%

35 #3. More people are shopping and buying online, and more often. We actually feel that people who are seeking information online are further along in the continuum path. --Christine Sakdalan, Novartis

36 The Internet can impact at ALL points along the consumer buying cycle Repeat Purchase Brand Loyalty Purchase Awareness 93.3 M Shoppers (71% of users) INTERNET 73.3 M Buyers (56% of users) Trial Interest, Attitudes, Consideration Gathering pre-purchase information

37 Which media source do you prefer to use for each type of information? Web TV Newsp Radio Mags Reference info 54% 1% 2% <1% 2% Travel info 51% 3% 9% 1% 9% Health info 39% 14% 12% 2% 20% Product reviews 31% 11% 11% 1% 21% Auto info 30% 4% 24% 1% 9% Financial info 28% 9% 19% 1% 1% Technology news 24% 12% 11% 12% 13% Source: Forrester Research, 2002; Base: 10,000 telephone sample

38 Where consumers prefer to get information: When you are planning a purchase, which source do you consider the best source for getting information? [Among 1,001 adults, in telephone survey] % Saying Internet 0% 20% 40% 60% 80% Start process of learning about a product/service Learn about features and benefits of a product Learn about different brands 63% 62% 61% Source: AOL/RoperASW, CyberStudy 2003

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40 #4. They are increasingly on broadband.

41 Millions of broadband households in the US, for 2002 Probe (Jul '03) Jupiter (Oct '02) World Bank (Mar '03) Informa (May '02) OECD (Dec '02) Kinetic Strategies (Mar '03) Morgan Stanley (Oct '03) emarketer (Mar '03) Strategy Analytics Yankee (Aug '03) Gartner FCC 17.4 M Source: emarketer,

42 All researchers are predicting at least 34% growth for 2003 (vs. 2002) PwC Jupiter Yankee Group Gartner Morgan Stanley World Bank Probe Research emarketer Strategy Analytics Informa 34.0% 36.3% 38.6% 38.9% 39.5% 39.6% 40.0% 40.7% 41.3% 43.1% Source: emarketer, % 10.0% 20.0% 30.0% 40.0% 50.0%

43 Broadband reaching critical mass (millions of households on broadband) % of all HHs % Sources: emarketer, 2003; OECD (baseline years of 2000, 2001)

44 ~ 90% of at work users are on broadband

45 % of home users getting online at least once or several times per day Broadband 73% Dial-up 46% 0% 20% 40% 60% 80% Source: Pew Internet & American Life Project, June 2002

46 Average weekly hours spent online % Forrester: Lift 58% Lift 8.2 Dial-up 12.6 Broadband Source: Arbitron Research, January 2003

47 For broadband users, time spent online rivals radio usage Internet 27% Newsps 6% TV 36% Broadband usage pulls mostly from television Radio 31% Source: Arbitron Research, January 2003

48 By 2005, there will be more broadband users and than dial-up users in US: Dial-up 49% Broadband 51% While 32% of all households will be on broadband in 2005, about 50%, or 83.9 Million 87.5 Million 56 million, will be watching Digital TV. --Ben Macklin, Senior Analyst, emarketer Sources: emarketer, 2003

49 #5. Use of rich media continues to grow.

50 Among 1,000 Jupiter: top publishers, rich media units Rich as & a Streaming % of total ads served media = 39% in % 8.0% 6.0% 4.0% 1.7% 2.0% Jupiter Research = 8% Advertising.com 0.0% = ~9% 7.9% Q1, 2002 Q1, 2003 Source: Nielsen//NetRatings and Dynamic Logic, June 2003

51 Rich media ads are more effective

52 The TV tide is turning Reaching our consumer targets is no longer TV driven. The days of spending hundreds of millions of dollars on TV advertising are over. Bill Lamar Jr., SVP Marketing, McDonalds [With Rich Media], you get a higher level of engagement with the product. Neil Perry, Director of Internet Marketing, McDonalds

53 Rich media advertisers spend more $, but also pay more attention to targeting Highly Targeted Targeted Diversified 7% 30% 21% 26% 49% 67% 0% 20% 40% 60% 80% Eyeblaster Ads All Online Ads Source: Nielsen//NetRatings, May 2002

54 Jakob Nielsen Usability Guru Rich media are appropriate only when they re presented in a space that is relevant to the user s goals or needs.

55 #6. The Internet is getting more relevant.

56 77% of marketers are currently using or evaluating search IAB: Search = 15.4% of total online ad spend in 02, and 21% in Q4

57 --Frederick Marckini, CEO, iprospect Search is the ultimate online marketing tool, because the behavior of search is more of an indicator of purchase intent than any other online activity.

58 Search will continue to grow Could top $7 billion by 2007 (Safa) Meets the need for measurement and accountability Leading to the development of truly relevant online advertising, i.e., contextual ads In addition to the media value, search provides valuable, real-time learning about consumers and how they express their needs

59 But as the pay-for-performance market heats up The bidding costs for advertisers will increase, particularly as larger firms step in And so too will the time, money and effort it takes to keep your listings up on top Besides, if you target only those who ve done their research and are ready to buy NOW you ll miss 80% of your market opportunity!

60 It s like putting all of your ad budget into the Yellow Pages: ABC Paint Company, Inc.

61 Search is only one way that Internet users begin an online shopping expedition WebSideStory = 13.4% (March 03)

62 The Bigger picture: The Internet is best used when integrated within the overall media mix Promotion Internet Stores Public Relations Yellow Pages Direct Mail, TV, etc BRAND Outdoor Radio Sales force Magazines, Newspapers Television

63 We have a ways to go

64 Who directs the media integration effort??? 100% 80% 74% 93% 60% 40% 20% 6% 22% 4% 1% 0% Agencies Clients Other Agencies Clients Sources: New York American Marketing Association, for Advertising Age, March 2003

65 Can emarketer help your business? Streamline your e-business research sources (and reduce costs) Eliminate critical data gaps Provide you with an objective, bird s-eye view of the entire e-business landscape Make better, more informed decisions about Internet and online marketing ventures

66 More information is available: For more information on every aspect of online advertising, marketing, B2B marketing online, online demographics, usage patterns, e-commerce, e-business, broadband or wireless trends, contact emarketer at: or You can also call or Kimberly Pagan directly at: T:

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