Advertisers flock to the Web

The number of advertisers spending money on the Internet has quadrupled this year, but online advertising is growing more slowly, according to a new report.

Between October and mid-November, online ad impressions reached 19 billion, a whopping 250 percent increase over the same period last year, according to a report to be released Monday by AdRelevance, a division of Jupiter Media Metrix. In addition, the number of retailers advertising online is up more than 250 percent during the same period.

A notable decline this year, however, is the growth of ad impressions, or the number of times an ad appears online. Median ad impressions per retailer were 23,000 this October, down 82 percent from 130,000 the same period in 1999, Jupiter found. Holiday-themed ads are also down by 59 percent.

Retail spending on online advertising increased for the first time this season in the second week of November.

"Despite high levels of holiday-related online advertising this season, it is becoming clear that retail advertisers are starting a little later this year," Charles Buchwalter, AdRelevance media research vice president, said in a statement.

He added that seasonal online advertising impressions and expenditures grew faster in 1999 than in 2000. AdRelevance conducted its survey from October to mid-November.

Out of about 2,700 retail online advertisers, 14 made up half of all retail online ad impressions, he said.

Because market pressures have forced online retailers to keep spending under control, advertising budgets are more conservative this holiday season. Only 11 percent of advertisers said they plan to spend more than 50 percent of their budgets on holiday advertising, down from 29 percent last year, according to a recent Jupiter Executive Survey.

Mixed news for online advertising Charles Buchwalter, VP, AdRelevance

As a result, advertisers are spending more of their budgets on direct mail as opposed to expensive TV advertising. Online, the majority of advertisers are focusing on email promotion campaigns for their high response rates and low cost, according to Jupiter. Online portals such as Yahoo and Excite are the second most popular choice for advertisers, but their popularity among executives is waning this year, Jupiter reported.

Amazon.com tops the list of holiday advertisers on the Internet, followed closely by Barnesandnoble.com and eBay. Of the top 10 retail advertisers last year--including Beyond.com, Buy.com, Drugstore.com and Office Depot?only five remain on the list this year. RedEnvelope.com and RadioShack took places in the top 10, along with Yahoo, 1-800-Flowers.com, Best Buy and Corbis.

Books, music and movies received top billing as the most heavily promoted items from October to mid-November, usurping auctions for the No. 1 spot from last year.

Online ad spending is expected to rise in the fourth quarter, but industry watchers say the level of growth will pale in comparison with previous years. Last year, online advertising reached $1.7 billion during the fourth quarter and accounted for 37 percent of total revenues for the year, according to the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers.

Internet advertising is expected to reach a total of $8 billion this year--up substantially from $4.6 billion last year.