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Web advertising poised for an upturn?

Internet ad sales dropped nearly 12 percent in 2002, but market researcher CMR forecasts a 7.4 percent comeback this year.

U.S. advertising spending bucked the economic odds in 2002 by rising more than 4 percent, but as expected, Internet ad sales dropped, according to new market research.

Advertisers spent an estimated $5.7 billion on the Internet last year, a decline of nearly 12 percent from sales of more than $6.5 billion in 2001, according to data released Monday from CMR/TNS Media Intelligence, a market research company owned by Taylor Nelson Sofres. Despite the drop, CMR has forecast that Web advertising sales will grow by 7.4 percent this year.

In contrast, total 2002 advertising expenditures for all media--including broadcast, print and outdoor--was $117.3 billion, a rise of 4.2 percent from $112.5 billion the previous year. The group expects the total to rise by 3.3 percent in 2003.

"Despite geopolitical and economic uncertainties, the marketplace outperformed our expectations for the year," Steven Fredericks, CMR's chief executive, said in a statement. He added that the surprise uptick was due to the elections, holiday spending and a bullish TV advertising year.

Internet ad sales have languished in the last two years after the industry's day in the sun during the late 1990s when sales grew by double-digit percentages. After several quarters of decline, the industry trade group Interactive Advertising Bureau reported a 1 percent rise in the third quarter of 2003 on sales of $1.47 billion. The growth, which was buoyed by a several top performers, including Yahoo, marked the industry's first uptick in six quarters.

Still, several researchers predict that Web advertising spending will make a comeback this year because of its economy compared with other media and wider recognition of its value in a complete marketing campaign. One area flush with cash, for example, is search engine marketing, driving companies like Yahoo and Overture to profits.

In its study, CMR also listed the top 10 advertisers for 2002, which included AOL Time Warner, whose estimated $1.85 billion ad budget increased by 5.7 percent for the year. Other leading advertisers included General Motors, Walt Disney and Ford.