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INDUSTRY SEGMENT PERFORMANCE

11/09/99

The Internet market continued to grow explosively in 1998.
Households spent $6.1 billion accessing the Internet, up 33.7 percent over 1997, and an additional $8.5 billion purchasing products over the Internet, more than seven times the 1997 total. Business-to-business electronic commerce was nearly five times higher than consumer purchases in 1998, totaling an estimated $40 billion.

Online advertising more than doubled in 1998, rising to $1.9 billion. (Business spending on the Internet is included in the figures for business information services and for professional information. Workplace use of the Internet for personal reasons is picked up in the electronic commerce data and, implicitly, in the advertising data.) Even excluding online purchases-the focus of the Forecast is on media and communications spending only-the Internet expanded by 46.5 percent to $8.1 billion in 1998.

Internet spending is dominated by end users. End-user spending on Internet access represented three-quarters of Internet expenditures in 1998. Spending by advertisers, however, has been growing more rapidly. Advertiser spending in 1998 was nearly 10 times the total of 1996. Over the same period, spending on Internet access doubled. The growth in Internet usage and the jump in the volume of online transactions have spurred online advertising.

Overall spending in the online market will grow at a projected 23.6 percent compound annual rate over the 1998-2003 period-33.7 percent for advertising and 19.7 percent for online access.
Source: Veronis, Suhler & Associates Communications Industry Forecast

10/26/98

Internet Leads All Other Media in Advertising Spending Growth
For the 5-year period 1997-2002, online advertising is forecasted to increase at a 48.3% compound annual growth rate (CAGR), to $6.5 billion in 2002. Spending for online advertising more than quadrupled for the second straight year in 1997, rising to $906 million from a 1996 total of $200 million.

Home Computer ownership will continue to rise, but at a slower pace than experienced in 1997, as pricing of home computers stabilizes. While the percentage of U.S. households owning a computer inches up from 44.0% in 1997 to 52.7% in 2002, the percentage of computer households hooked up to the Internet will continue to rise dramatically, from 52.3% in 1997 to 79.9% in 2002.

The total number of online subscriptions in the U.S. will rise from 24.8 million in 1997 to 42.1 million in 2002. Monthly flat-rate access fees will rise at a relatively flat 2 % annual rate. Total consumer spending on online access will rise at a 16.5% CAGR from $4.8 billion in 1997 to $10.3 billion in 2002.

Consumer usage hours will increase sharply over the forecast period, thanks to greater quantity and quality of content available online. Over the five-year period, consumer spending on online content is forecasted to grow at a 22.4% CAGR to $632 million in 2002, up from $230 million in 1997. By 2002, however, spending on advertising will be more than ten times as great as spending on content.

Total spending in the consumer online market will rise to $17.5 billion by 2002 from $6.0 billion in 1997, a CAGR of 24.0%. From 1992-1997, spending grew at a compound annual rate of 48.3%.
Source: Veronis, Suhler & Associates Communications Industry Forecast

10/01/98

Transactional activity among Internet providers continued to expand at a healthy clip in 1997, rising to $3.1 billion from $2.2 billion in 1996
Among major transactions was H&R Block's sale of the remaining 80% interest in CompuServe for $1.2 billion; GTE's acquisition of BBN Planet for $616 million; Microsoft's purchase of WebTV for $425 million, and the acquisition of Netcom Online by ICG Communications for $284 million.
Source: Veronis, Suhler & Associates Communications Industry Transactions Report


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