UK online advertising revenues will soar from £50 million at the end of 1999 to £625 million by 2004.The increase will come mainly at the expense of direct marketing, according to new research.
The report, from internet research firm, Fletcher Research, predicts a fall in direct mail expenditure of 33 per cent by 2004 as companies that currently advertise online switch marketing expenditure.
Direct marketing will not be the only casualty among traditional media. Over the next four years online will also increasingly take spend from outdoor and radio advertising, and will begin to dent press advertising as well.
These are some of the findings of the new book-length report "Online Advertising Grows Up: Exploiting a New Marketing Medium".
Caroline Sceats, analyst at Fletcher Research said: "The internet will win because of the precision targeting it offers advertisers. However, targeted online advertising requires media owners to better understand their users, and advertisers should insist that they are provided with consistent and measurable audience data."
The report also forecasts that internet dotcom companies will rely heavily on TV and press advertising in the short term to maximise exposure, but in the long term Fletcher expects these companies to grow their internet ad budgets once their brands are sufficiently well established.
The percentage of budget committed by dotcoms to online advertising will need to increase significantly, and Fletcher predicts total online ad spend by pure plays to rise from the current £24 million to £285 million by 2004, accounting for 35-40% of their overall ad budgets.
Sceats adds, "Online retailers and publishers need different online ad strategies. Both should use email and banners to grab consumers' attention and drive response. Retailers should use pop-ups for attracting shoppers, but publishers must concentrate on content partnerships and sponsorship programmes to succeed."