Research Project Proposal

The Future of Internet Advertising: Boom or Bust?

Digital technology has transformed the way organizations and businesses advertise. Strategies including rich media and streaming audio and/or video are steadily replacing traditional advertising techniques. However, the audience of the Internet Age is different and more powerful than that of yesteryear. As technology increases and more people log on to the Web, advertisers will continue to bombard users with their banners, pop-ups, and Webmercials. To the dismay of the industry, Internet advertising has been growing faster than traditional media advertising, but it still takes last place ranking below TV, newspapers, magazines, and radio. Will streaming media and convergent media buying give online advertising the boost it needs, or will it go bust like so many of the already forgotten dot coms? How will this growth be accurately measured and reported?

As the adoption of high-speed Internet connections grows, so does the ability to deliver high-quality, interactive advertising without the restrictions of traditional methods. Net advertisers like Buick and Pepsi are spending more on marketing including filming and footage, much like what see on the tube between shows. Theoretically, this gives more freedom to both the company and the consumer. Unlike TV commercials, which are usually a 30-second spot, Webmercials last longer and are produced to create a "short-film-like experience." In this case, the Web location acts a programming channel, and the advertiser controls the content. Strategists suggest that advertising online is overall more effective because once consumers are on the Web, they can be targeted, recorded, and repeatedly exposed.

In addition to increased access and emerging technologies, newly established global media measurement guidelines are expected to hasten the growth of Internet advertising spending by simplifying the buying and selling process for advertisers, marketers and publishers. The guidelines offer a detailed definition for counting an ad impression, which is a critical component in establishing consistent and accurate online advertising measurements across publishers and ad serving technologies. Already underway in the United States, wide implementation of the guidelines is expected by the end of 2005.

After the worst economy in six decades, media agency execs concurred that online advertising would make a comeback in 2004. According to the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC), they were right. Internet advertising totaled approximately $2.43 billion in the third quarter of 2004 - the eighth consecutive quarterly increase for the industry and the fourth record-setting quarter. “Revenue results for the first nine months of 2004 totaled slightly over $7.0 billion versus the $7.3 billion reported for all of 2003. Based on historical revenue results, 2004 is shaping up to be a record year, possibly exceeding by a large margin the previous revenue record reported in 2000 of $8.0 billion,” said Pete Petrusky, Director, Advisory Services, (PwC).

Do the numbers speak for themselves? Is Internet advertising a fully mature and stable industry? Are Internet users ready to trust this method of advertising? Many say no and still prefer the traditional method. Some are refusing to be targeted, mostly due to the annoyance of pop-ups and spam. Users are installing smarter filters and signing up for free or relatively inexpensive programs that block most types of ads. While companies like Yahoo! and Google continue with paid searches and consumers are bribed with free computers in exchange for viewing uploads of ads each month, the rest of us can sit back and see who comes out on top. Will Internet advertising have the strength and endurance to beat the tried and true traditionalists? Only time...and numbers will tell.