INDUSTRY SEGMENT PERFORMANCE
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.
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 Transactions Report
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