Services & Software

Online marketing increases 75 percent

Marketing via banner ads, e-mail promotions and partnerships prompted an estimated $24.2 billion in online spending in 2000, a new survey says.

Direct marketing via banner ads, e-mail promotions and partnerships prompted businesses and consumers to spend an estimated $24.2 billion online in 2000, more than 75 percent higher than 1999 figures, according to a survey released Tuesday.

To ring those sales, companies invested $2.8 billion in Web-based direct marketing last year, increasing more than 70 percent from the $1.6 billion spent in 1999, according to the Direct Marketing Association's (DMA) annual report on the interactive marketing industry.

The DMA's report measures direct-response channels such as online advertising and e-mail promotions based on their ability to solicit a sale, generate a customer lead or draw traffic to a particular sale site. Under this methodology, online advertising spending devoted to increasing product awareness is not included in the estimates, for example.

The numbers show promising growth for interactive media despite softness in the online advertising market, which has trampled countless dot-coms. Recent online ad spending figures reflect slowing growth in an industry that enjoyed unbridled expansion over recent years. Like these numbers, researchers predict interactive marketing will begin to pull back, yet still enjoy growth rates higher than other industries.

"Interactive (marketing) will continue to be a vital channel for direct marketers because it allows for efficiencies of scale," said Ann Zeller, vice president of research for the DMA.

The DMA forecasts that interactive marketing spending will grow by 38 percent annually over the next five years, reaching $13.8 billion in 2005. Sales generated as a result will rise by an estimated 41.3 percent annually, hitting $136.4 billion in 2005.

In comparison, traditional direct marketing will grow on average of 9.6 percent annually and advertising roughly 6 percent annually, according to the report.

The report also found that the financial services industry led consumer interactive spending with sales of $1.1 billion. Following were real estate with $638.1 million in sales, communications with $637.4 million in sales, transportation equipment with $579.8 million in sales, and industrial machinery and equipment with $476.8 million in sales.

Interactive marketing is only a small portion of all direct marketing sales, which reached more than $1.7 trillion in 2000 in the United States, including $110 billion in catalog sales, according to the report.

Nevertheless, as businesses become more comfortable with the Internet, interactive marketing is a natural extension of the business, Zeller said.

"It's a bottom-line issue: Direct marketing is very productive," Zeller said. "When there are concerns about the economy, direct marketers are thinking about how they can...(use) interactive marketing to trim back on larger cost areas," such as labor.

The DMA commissioned the report from a forecasting company, the WEFA Group, formerly Wharton Econometric Forecasting Associates. The figures are determined from an economic model that tracks interactive marketing expenditures, revenue and employment in both the consumer and business-to-business markets throughout 52 industries.