Report: Online Ads Drive New Site Growth

Although the Internet advertising industry has taken a hit in recent months, a report released Thursday finds that online firms should not be so quick to scale back their Web-based marketing efforts in a bid to trim operating budgets.

According to data from online measurement firm Jupiter Media Metrix, the top 25 newcomer Web sites in 2000 were fueled by word-of-mouth and direct marketing , traffic-sharing, sweepstakes and promotions.

"Despite marketplace skepticism, the top newcomers in 2000 are proof that online advertising still works," said Jupiter Research senior analyst Patrick Keane in published reports.

Since the vast majority of these Internet upstarts are pure plays and lack brand-name backers, Media Metrix said that they often require registration to amass contact databases for direct marketing purposes and to broaden their online reach.

"The ongoing challenge these and future newcomers face is converting these databases and traffic into income, especially in a skeptical market with less venture capital and investor patience," Keane said.

List Toppers

Entertainment and gaming site Grab.com was Media Metrix's top newcomer of the year, with 13.5 million unique visitors in December. Traffic to the site increased by 115.8 percent since its launch in March at 6.2 million unique visitors.

Among e-commerce firms, discount online marketplace Half.com was the top gainer on the list, according to post-debut traffic growth. With nearly 800 million online ad impressions in 2000, the site is the most advertised newcomer for the year.

Traffic to the site grew 537.2 percent since it first appeared in March, increasing from 1.3 million to 8.2 million unique visitors in December, Media Metrix said. Half.com, which is owned by Web auction giant eBay, was the only newcomer on the list that enjoys a big-brand affiliation, the research firm found.

Internet payment firm PayPal.com also racked up impressive numbers, landing in the No. 5 slot on Media Metrix's list. Traffic to the site, which is one of the fastest growing financial services on the Net, spiked over 224 percent since its launch last February, climbing from 1.2 million unique visitors to nearly 4 million in December.

Set for a Comeback

Despite grim predictions, a number of recent studies also have indicated that the online advertising industry may be poised for a rebound.

A report released last month by Forrester Research said that the current ad spending slump is only a temporary pause in the market's overall growth. Moreover, Forrester found that traditional U.S. companies will funnel US$63 billion annually by 2005 to support digital marketing campaigns which integrate online advertising, promotions and e-mail strategies, compared to the $11 billion spent last year.

Forrester's report came on the heels of data released by Jupiter Media Metrix-owned AdRelevance that showed that online ad impressions in December climbed 21 percent from the previous month to reach a record high of over 65 billion ads viewed.