Report: European Advertisers Undervalue I-Marketing

U.S. Internet businesses are not the only ones experiencing a slowdown in the online advertising market, according to a survey released Tuesday by Jupiter MMXI.

Jupiter found that 42 percent of European advertisers plan to spend only 1 to 5 percent of their entire 2001 advertising budgets online. Jupiter said that those companies might be overly pessimistic about the Internet's effectiveness as an ad channel.

"Of those who are advertising online, many are still in the evaluation stage," Jupiter MMXI advertising analyst Staffan Engdegard said. "However, if they use traditional media selection and performance criteria to evaluate the success of their campaigns, they risk undervaluing the opportunities the Internet presents."

According to Engdegard, the reason for staying away from the Internet lies in the belief that the medium cannot reach a large enough audience to justify the expense.

Forty percent of European businesses plan to spend nothing on online advertising this year, according to Jupiter, which surveyed 113 European advertisers for its study.

Opportunity Knocks

However, Engdegard believes advertisers are making a big mistake if they continue to ignore the Internet as a way to increase their brand identity and awareness, because European consumers continue to spend more and more time online each month.

For example, Engdegard pointed to Jupiter numbers showing that Internet users in the UK increased the time they spent online by 90 minutes over the past year.

"Brands need to develop online marketing and advertising as a distinct practice to optimize the potential of the Internet," Engdegard said. "Brands should apply a targeted-marketing model better suited to the dynamics of the Internet than the mass-marketing model most are used to."

Internet Necessities

Engdegard said that advertisers should understand the context of how consumers are using each site, rather than trying to target consumers simply by site content.

"Whether it be through adding value, education, identifying new target groups, or even experimenting with new ideas and products, consumer brands cannot ignore the Internet," said Engdegard.

On the Rebound

According to another Jupiter Media Metrix report released earlier this month, Internet companies will have to wait at least another year before the advertising market rebounds. Online ad spending will fall 20 percent this year to US$5.7 billion, down from an earlier forecast of $7.3 billion, Jupiter said in that report.

Jupiter also said it expects the Internet marketing sector to see about $15 billion in spending by 2006, off substantially from earlier projections. For 2005, Jupiter now predicts spending of $12.9 billion, down from a previous estimate of $16.5 billion.

The real growth in ad spending, Jupiter said, will come from digital marketing such as coupons, promotions and e-mail, rather than direct advertising on Web sites. Jupiter forecast that digital marketing spending will hit $19.3 billion by 2006, compared to an estimated $2 billion in 2001.