Internet Advertising Analysis Part 21; Pageviews
Pageviews are critical, because they determine the number of ads that a user views during his/her time online. (Of a course, a single page — one pageview — may have several, or no, ads on it. We have assumed an average of two ads per Web page.) For calculating pageviews, we start with the number of pageviews that an average user views in an hour. We then gross this number up to the total number of pageviews in a year. In 1996, we believe that the average user viewed 25 pages per hour. This number jumped about 48% to 37 pages per hour in 1997. In 1998, pageviews per hour climbed about 34% to 50. In 1999, we believe that this increased 21%, to 60 pageviews per hour. Assuming an average of two ads per page, we calculate the number of ads served.
Table 83 U.S. Internet Usage Forecast
Pricing — Effective CPM
We differentiate between the list price CPM (cost per thousand impressions) and the effective price CPM on the Internet. Most sites start with a list price CPM, which advertisers barter downward before reaching the effective CPM. We arrive at an estimate for effective CPMs (hereafter referred to simply as the CPM) through two methods. The first is based on the number of ads served, the other on 0:30 spots. When discussing CPMs on the Internet, it is important to remember that Internet CPMs represent the average pricing of all sites on the Web. Unlike broadcast television, or even weekly news magazines, that have a very limited advertising inventory, the Internet effective CPM covers all sites on the Web generating advertising revenue. Pageview CPM. We arrive at an estimate for our preferred metric, the pageview CPM, by taking the total amount of Internet advertising revenues generated and dividing this by the number of ad impressions (or, more accurately, by thousands of ad impressions) served. For this analysis, we have assumed that an average of two ads are located on each page. The pageview CPM gives the amount that an advertiser spends to generate 1,000 views of an advertisement. In 1996, we estimate that the effective CPM was $2.35. In 1997, the CPM grew about 29% to $3.04. In 1998, CPMs increased by about 6%, to $3.23. In 1999, we estimate that a lift of 21% to $3.90 occurred. In 2000, we expect CPMs to remain flat at $3.90. 0:30 spot CPM Another way of looking at CPMs — which is more akin to the television model — is by breaking Internet advertisements into 0:30 commercials. When conducting this analysis, the Internet CPM declines even further from its list price. In 1996, we estimate that a 0:30 spot CPM was $0.98. This means that advertisers paid just over a dollar to reach 1,000 Internet users for thirty seconds each. In 1997, the spot CPM rose an estimated 98% to $1.88. In 1998, we estimate this climbed another 42% to $2.68. We estimate the spot CPM climbed 46% to $3.91 in 1999. In 2000 and 2001, we expect 10% and 16% growth, respectively, with pricing of $3.91 and $4.28.
Table 84 U.S. Internet CPM Forecast
Table 85 U.S. Internet Advertising Forecast; Figure 35 Internet Advertising Revenues
Traditional Advertising & Marketing Services
The traditional advertising and marketing services market is enormous. In the U.S., we estimate that advertising and marketing spending reached nearly $389 billion in 1999, and we expect $420 billion in 2000.
The U.S. represents about 42% of the $363 billion global advertising budget and 76% of the $315 billion global marketing services budget. Combining advertising & marketing services, the U.S. represents 57% of the $678 billion market we forecast for 2000.
In the U.S. in 2000, we expect 8.3% growth in advertising and 7.8% growth in marketing services, for a total of 8.0%, up 70 basis points from 1999E. Globally in 2000, we expect advertising growth of 7.6%, up 140 basis points from 1999. Advertising & Marketing Services: A Big Market The traditional advertising, direct marketing, and other marketing services sectors represent a large global market of $678 billion of gross media spending. Developed media markets tend to demand more in marketing services — “below the line” alternatives to traditional media advertising. Marketing services include non-media direct marketing, promotions, public relations, and other specialty communications.
Figure 36 Global Advertising & Marketing Services (2000E $ Billions)
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Part 22; Advertising vs. Direct Marketing , Part 23; Investment Conclusion
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