Jupiter & Media Metrix

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1 Jupiter & Media Metrix ADVERTISING Report Measurement and Analysis of the B-to-B Market August 2000 advertising.jup.com

2 Jupiter & Media Metrix This report is the first to combine measurement data from Media Metrix and its AdRelevance division with analyst insight from Jupiter research in order to provide a comprehensive resource to key decision makers in the online advertising and business-to-business markets. This report is based on Media Metrix online advertising intelligence and audience measurement data, and Jupiter analyst interpretation of data, opinions on industry trends, and market forecasts surrounding the intersection of online advertising and the rapidly growing B-to-B market. The combination of measured consumer behavior, tracked online advertising inventory, and Jupiter analyst expertise provides a rich lens through which to understand and anticipate the changes in the online advertising and B-to-B markets. All sources of data for this report were collected at various points over the last 12 months. The AdRelevance data measure where, when, how, and how much Web marketers are advertising online, using AdRelevance s patented intelligent-agent technology. All advertising impressions measures are based on standard 468 x 60 banner advertisements and may include house ads. All spending figures are based on non-negotiated rate card information and may include some house ads and barter impressions. For the purposes of this report, the US market is examined exclusively, and mainstream online media refers to the top 500 most visited ad-supported Web sites that the AdRelevance service measures, based on Media Metrix data. Classifying over 300,000 unique ads to date and probing over five million pages per week, the AdRelevance Service captures virtually all commercial online ad spending. More information on AdRelevance, Media Metrix, and Jupiter research methodologies can be found at their respective Web sites ( and The B-to-B sector is only the first of many to which this analysis will be applied. AdRelevance provides the most comprehensive and accurate data for tracking and analyzing online advertising across industries most critical for buyers and sellers of online media space. Jupiter, the worldwide authority on Internet commerce, provides comprehensive analysis, forecasts, and insight into the online advertising market, as well as more than 10 vertical industries. For a preview of this analysis applied to other industries, please visit Jupiter Related Research Online Advertising: Workplace Targeting: Connecting with Consumers During the New Prime Time, Volume 3, 2000 MindShare: The Business-to-Employee Model: Acquiring Captive Audiences at Lower Cost, Volume 4, 2000 B-to-B Marketing: Beyond B-to-C, April 26, 2000 B-to-B Marketing: Net Markets: Positive Net Opportunities, April 5, 2000 AdRelevance Related Research Secrets of the B-to-B Ad Boom: Smart Advertisers Aim for Eyeballs on the Job, March 2000 AdRelevance Rate Card and Ad Dimensions Report, August 2000 Media Metrix Related Research Digital Media Report, May 2000

3 Market Size: B-to-B Demonstrates Strong Rise in Online Advertising Impressions 1 B-to-B Online Advertising Impressions, 2Q 2000 It is not just business-focused, industry-specific publications that will win the growing B-to-B online advertising market. Mainstream media sites have much to gain from this growing industry, earning fully 50 percent of this market s potential revenues over time. Jean-Gabriel Henry Senior Analyst, B-to-B Marketing The B-to-B industry is the fastest growing online advertising segment in mainstream online media, growing from over one billion online advertising impressions in third quarter 1999 to 5.6 billion in second quarter Due to increased targeting capabilities online, Jupiter analysts believe that more B-to-B companies will continue to commit more of their advertising budgets to the Internet. And, fully 50 percent of online advertising spending by B-to-B companies will take place on mainstream online media such as Yahoo! and Business Week. Online advertising networks make purchasing advertising inventory on a wider array of smaller sites more efficient than in the off-line world. As such, Jupiter analysts believe that the other 50 percent of B-to-B online advertising budgets will be spent on more focused business trade publications, such as Agriculture.com, and on Net Markets (online intermediaries that connect fragmented buyers and sellers, such as VerticalNet). In comparison, roughly two-thirds of advertising spending by B-to-B companies in the traditional world takes place in mainstream media (e.g., Time Magazine), while the remainder is spent on business trade publications.

4 Market Share: B-to-B Accounts for Growing Share of Online Advertising Impressions 2 B-to-B Market s Share of Online Advertising Impressions, 2Q 2000 The B-to-B market s share of online advertising impressions will only increase. We expect it to pass the 10 percent mark easily in third quarter 2000 and rival retail financial services for the number three spot in Patrick Keane Director & Senior Analyst, Online Advertising Growing from five percent of total online advertising impressions in fourth quarter 1999 to eight percent of total online advertising impressions in second quarter 2000, B-to-B online advertising is the fastest growing segment of online advertising. At eight percent or 5.6 billion of total advertising impressions in mainstream online media, the B-to-B market is the fourth largest category of online advertising spending today, after Web media with 25.2 billion impressions, retail with 14.8 billion impressions, and financial services with 10.1 billion impressions in second quarter Web media dominates the online advertising impressions landscape with a full 38 percent share of the total in second quarter 2000, though roughly half of this may be house advertising. Retail and financial services follow closely with 22 percent and 15 percent, respectively, for the same time period.

5 Market Growth: B-to-B Market Outpaces the Industry Average 3 Growth in B-to-B Online Advertising Spending Due to its relative immaturity and smaller current base of ad impressions, we believe that the B-to-B market will maintain a faster growth rate than the overall industry for the next three years. Vipul Patel Director, Forecasting Growth in total online advertising spending has slowed over the last several quarters, dropping from an incredible 92 percent quarterly growth rate in fourth quarter 1999 to a still-vibrant 15 percent in second quarter 2000, equivalent to 75 percent annual growth rate at the 15 percent per-quarter rate. Jupiter analysts believe that total online advertising spending will grow to $16.5 billion in However, due to the relative immaturity of the B-to-B market and, therefore, its much smaller base of online advertising impressions, it is the fastest growing segment of online advertising. In fourth quarter 1999, its growth rate was just below the industry average at 89 percent; however, it has easily surpassed the industry average with 94 percent growth in first quarter 2000, slowing to a still-incredible 54 percent in second quarter 2000, or, if second-quarter growth rates persist, 462 percent over the course of a year.

6 B-to-B Segment Breakdown: Service Companies Dominate B-to-B Online Advertising 4 Share of B-to-B Online Advertising Spending by Company Type, 2Q 2000 We believe that B-to-B service companies will maintain their 70 percent share of B-to-B advertising spending on mainstream online media over the long term. Targeting a wider audience, service companies not product companies will continue to dominate B-to-B advertising impressions on sites like Yahoo! and Business Week. Jean-Gabriel Henry Senior Analyst, B-to-B Marketing Today, service companies, such as Anderson Consulting, Federal Express, and Citicorp, represent 70 percent of online advertising spending by B-to-B companies on mainstream online media, while product companies, such as Sun, Grainger, and Xerox, represent only 30 percent. Jupiter analysts believe that this 70:30 service to product company ratio will be maintained for the foreseeable future. Most service companies target a broader range of businesses with their services and, therefore, will continue to be the dominant B-to-B advertising spenders on sites with the greatest reach. To date, more online users are part of the target audience for service companies. As more of the B-to-B product companies target audiences come online, these users will be found on more-focused business trade sites and on Net Markets. As such, Jupiter analysts believe that product companies will increase their online advertising spending on smaller, focused sites, rather than on mainstream online media, keeping the above ratio intact.

7 Market Driver: More B-to-B Companies Seeing Value in Online Advertising 5 Number of B-to-B Companies Advertising Online With the number of well-funded Net Markets growing and with fewer than 10 percent of them using online advertising today, Net Markets will be a significant driver of future growth in the number of B-to-B companies advertising online. John Katsaros VP & Director, B-to-B Research A main driver in the growth of B-to-B online advertising spending is the number of companies shifting their advertising dollars to the Internet. Growth in the number of B-to-B companies embracing the Internet as an advertising vehicle is an amazing 10 percent per month today, rising from only 635 in January 2000 to over one thousand in June Jupiter analysts believe that this number will continue to grow as more traditional B-to-B companies shift a portion of their advertising budgets to the Internet. In addition, the number of new well-funded Net Markets and online-only companies will continue to grow, and they will use the Internet as one of their primary means of reaching target audiences. As online advertising proves itself to be efficient and easily tracked, an increasing number of B-to-B companies both online-only and traditional will spend more of their advertising dollars online.

8 Market Driver: B-to-B Companies Increase Commitment to Online Advertising 6 Average Monthly Online Advertising Spending per B-to-B Online Advertiser While monthly online advertising spending by B-to-B companies will continue to grow, we believe that it will never approach that of the industry average of approximately $91,000. Michele Slack Senior Analyst, Online Advertising A significant driver of B-to-B online advertising spending is the amount spent per B-to-B company on online advertising. The monthly average online spending per B-to-B company has grown from approximately $47,000 in January 2000 to just over $53,000 in June 2000, while the average for the industry overall has remained relatively stagnant. However, B-to-B advertising per company still pales in comparison to the industry average of approximately $91,000, and industry segment averages vary widely. For instance, financial services companies advertising online spend approximately $285,000 per month while travel companies advertising online spend only approximately $36,000 per month. Jupiter analysts believe that average monthly online advertising spending per B-to-B company will increase; however, it will remain on the lower end of the spectrum, as the top B-to-B advertising spenders, in general, have smaller total advertising budgets than do the top advertising spenders among consumer-oriented businesses. The rapid increase in spending per company, the relative lack of sophistication of B-to-B companies with regard to online advertising, and the heightened demand for targeting in this market will drive increased demand for services provided by publishers, agencies, and other advertising support players.

9 Publisher Dynamics: B-to-B Online Advertising Widely Distributed Across Publishers Number of Sites That Get 80 Percent of Online Advertising Impressions by Industry, 2Q Even as the B-to-B market matures, we believe that online advertising by these companies will become even more widely distributed across numerous publishers sites due to the fragmented nature of the B-to-B marketplace. Ken Allard VP & Group Director, Technology and Operations Research Today, 80 percent of online advertising spending by B-to-B companies goes to 25 sites. This represents a wider distribution of the advertising pie across publishers compared to other, more mature industry segments. For example, financial services companies spend 80 of their online advertising dollars on only eight sites, and retailers spend 80 percent of their online advertising budgets on only 10 sites. The number of sites that earn 80 percent of the advertising revenue in these markets is indicative of the total number of publishers that receive advertising impressions in a particular industry. Jupiter analysts believe that even though the B-to-B market is immature relative to the financial services and retail industries, B-to-B ad spending will become even more fragmented in the future, as hundreds of vertically oriented sites and Net Markets develop critical mass and emerge as viable advertising platforms. The fragmented nature of the B-to-B market necessitates that these companies seek their target audience at a wide range of sites. Jupiter analysts believe that this is good news for publishers of all kinds, as many sites will participate in the revenue potential of this rapidly growing industry and its online advertising spending.

10 Publisher Revenue by Industry: Those Publishers That Win in B-to-B, Win Big Average Quarterly Advertising Revenue Earned per Top Publisher*, 2Q It is well worth it for publishers to spend the time and money to target B-to-B online advertisers. Not only is the segment the fastest growing today, but it is also one of the most financially rewarding for the top publishers in the category. Claudine Singer Senior Analyst, Online Advertising *Top publishers are the set of sites that generate 80 percent of advertising impressions within a particular industry segment. The top publishers benefiting from B-to-B online advertising in second quarter 2000 each earned $5 million on average. This is an impressive return, given that spending by B-to-B companies is far more widely distributed across publisher sites than that of other industries. Jupiter analysts believe that while the distributed nature of B-to-B online advertising spending will bring more and more publishers into the fold, the growth in online advertising spending by these companies will continue to drive greater revenue for the most successful publishers in this category. Today, for top publishers in a particular category, the B-to-B market ranks third in terms of average quarterly revenue. The retail and financial services industries offer much larger average quarterly revenue returns to the top publishers in those advertising spending categories, approximately $30 million and $25 million, respectively. However, these big wins go to a much smaller number of sites (10 and eight, respectively).

11 Advertising Impressions by Publisher: Early Success in B-to-B Matches Overall Industry Sites with Highest Number of B-to-B Advertising Impressions, 2Q Competition for B-to-B online advertising dollars will come from Net Markets due to their ability to offer targeted advertising opportunities to ready-tobuy users. Mainstream online media must improve their ability to deliver personalized advertising to target B-to-B audiences to maintain their share of this growing market. Tim Clark Senior Analyst, Net Markets The largest volume of B-to-B online advertising impressions is on the same sites that lead overall advertising impressions, including MSN and Yahoo!. While Jupiter analysts believe that B-to-B companies are wise to seek the reach that these highly trafficked sites offer, we also believe that in the future B-to-B companies will seek more focused sites that reach a more targeted audience, even if in smaller quantities. Sites with a higher percentage of their audience from work or with more business-focused content will likely threaten the ranks of today s top B-to-B publishers, as ranked by B-to-B advertising impressions. In addition, mainstream online media will have to fight the onslaught of business trade publications and Net Markets as attractive online advertising opportunities for B-to-B companies, particularly product companies. VerticalNet s early success in winning online advertising revenue from B-to-B companies is just one example of the coming competition for this growing market. In second quarter 2000, VerticalNet earned over $20 million in online advertising revenue made up largely of online storefronts and sponsorships, rather than banner ads.

12 Publishers with Potential: High Percentage of Audience from Work Indicates Potential B-to-B Success 10 Sites That Accept Advertising with Highest Percentage of Unique Visitors from Work, Media Metrix Top 200, May 2000 Many sites that have a high percentage of users from work are often geared toward personal use of the Internet while at the office. However, the work audience is a key target for B-to-B advertisers, and we believe that these sites are well positioned to win the online advertising dollars of many B-to-B particularly service-oriented companies. Marc Johnson VP & Group Director, Marketing and Media Research Source: Media Metrix, May 2000 Few highly trafficked sites have a high percentage of their users coming from work. In fact, among the Media Metrix top 200 sites for May 2000, only MarketWatch.com reaches the 50 percent mark. However, many news, local content, and travel sites, such as CNN.com, CitySearch, and Travelocity, win a significant portion of their audience from the office. Jupiter analysts believe that while currently none of these sites are the top publishers in the B-to-B online advertising category, they have significant potential in helping B-to-B advertisers target the at-work audience. While many of these sites are largely for personal Internet use at work, their audiences comprise a significant number of users who are at the office and often making purchasing decisions, making these some of the sites with the most promise of participating in the future growth of B-to-B online advertising spending.

13 About Media Metrix Media Metrix, Inc., with more than 900 clients, is the leader and pioneer in Internet and Digital Media measurement and the industry s source for the most comprehensive, reliable, and timely audience ratings, e-commerce, advertising and technology measurement services. Media Metrix s AdRelevance division, through its superior ad tracking technology, provides clients the most comprehensive data on where, when, how and how much Web marketers and their competition are advertising online. Media Metrix has worldwide majority-owned operations through partnerships with media and market research leaders around the world. Media Metrix s European affiliate, known as MMXI Europe, operates in France, Germany, Sweden and the United Kingdom. Media Metrix also operates in Australia, Canada, Japan, Latin America and the United States. The Company provides advertising agencies, media companies, e-commerce marketers, financial services and technology companies with the most comprehensive coverage of all digital media (including more than 21,000 Web sites and online properties). Media Metrix utilizes its patented, superior operating-system metering methodology to track Internet and Digital Media audience usage behavior in real-time click-by-click, page-by-page, minuteby-minute. Media Metrix has a sample of more than 100,000 people under measurement worldwide, yielding monthly, weekly, and daily data collection and reporting. For more information on Media Metrix visit About Jupiter Communications Jupiter Communications, the worldwide authority on Internet commerce, provides strategic analysis and insight to give businesses a competitive advantage in a complex and rapidly changing Internet economy. Jupiter provides its business-to-business and business-to-consumer clients with comprehensive views of industry trends, accurate forecasts and today s best practices, all backed by proprietary data. Jupiter s research and advisory services, offered on a continuous subscription basis, provide written analysis, supportive data and access to expert analysts. Jupiter offers a comprehensive view of Internet commerce by providing expert analysis of Internet Strategies (focused on broad business issues) and Market Strategies (focused on industry and region-specific issues). Jupiter Communications also produces a wide range of conferences that offer senior executives the opportunity to hear firsthand the insights of its analysts and the leading decision-makers in the Internet and technology industries. Jupiter Communications is based in New York City, with operations in London, San Francisco, Stockholm, Sydney and Tokyo. For more information on Jupiter Communications visit

14 Contact Jupiter Communications 627 Broadway New York, NY Media Metrix Inc. 250 Park Avenue South 7th Floor New York, NY