When America Online warned Wall Street on Wednesday of larger-than-expected declines in advertising revenue this year and next, it seemed to reinforce the pessimism.
Paid keyword searches, online classifieds and "rich-media" ads, which incorporate video, animation and sound effects, are helping portals like Yahoo buck the overall trend.
And after two years of double-digit declines in percentage terms, including this year's expected 11.5 percent fall to US$6.38 billion, online advertising is expected to bounce back next year, according to eMarketer, a market research firm in New York. In a study released Monday, eMarketer estimated that online advertising spending will rise 5 percent next year.
Resistance to online advertising still exists among marketers, some of whom were stung by outlandish outlays during the Internet bubble. But many traditional marketers are now more comfortable with the medium, as shown by Frito-Lay's decision to triple the Doritos marketing budget devoted to online advertising.
"What's compelling to us about the long term is that people aren't just turning to the channel as an alternative way of getting information," said G.M. O'Connell, chairman at Modem Media, an online agency in Norwalk, Connecticut. "For many people it's the default way of getting information."
O'Connell said his agency is urging clients like Kraft to spend their money on creating useful content to distribute online, in addition to advertising on established content sites. He also stressed the value of paid keyword searches, which place an advertiser's message next to search results on sites like Google.
Maggie Boyer, vice president for media at Avenue A, an interactive agency in Seattle, said, "Search is knocking everything out of the water. We can't buy enough of it."
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