Despite the ailing state of the online ad industry, European internet advertising will comprise 5% of all marketing budgets by 2005, according to a new study by Forrester Research.

In the UK, online adspend is forecast to rise from £200 million this year to £885m in 2005, second only to Germany in Europe’s internet market.

Forrester, which interviewed 31 advertisers, seventeen clicks-and-mortar e-tailers and fourteen dotcoms, also predicted that the nature of online advertising is due to change. Sponsorship and email marketing will begin to displace banner ads, whose current 60% share of online adspend is set to decline to 48% in 2003.

The switch to a more integrated web strategy is said to be vital to the revival of the industry’s fortunes – only 58% of marketers taking part in the survey felt that internet ads currently fulfil their promises.

“To exploit the potential of interactivity, marketers must drop traditional one-size-fits-all advertising campaigns,” commented Forrester analyst Diana Janssen. “Instead, executives must use interactive scenarios in fitting with interactive media. Marketers must start building a dialogue that takes users through preference, consideration, purchase and loyalty.”

Nevertheless, the report warned that, as advertisers seek to reach multi-channel consumers, marketing via mobile phones or digital TV could still draw adspend away from the web.

News Source: CampaignLive (UK)