December 28, 2001, 12:00 AM

CPG manufacturers will boost online ad spending in five years

Fueled by a growing mass market audience on the web, CPG online ad spending will soar to $885 million by 2006 from $134 million in 2000.

Consumer package goods manufacturers, more comfortable with traditional offline advertising and its metrics, have been reluctant to spend big on online advertising, but that’s changing fast, according to new research from Jupiter Media Metrix. Fueled by a growing online population more representative of the mass market and new advertising opportunities in rich media formats, CPGs will boost online ad spending to $885 million by 2006, up from $134 million in 2000, Jupiter predicts. That means the current online ad market slump offers a potential opportunity for brand manufacturers to test and refine online ad strategies relatively cheaply, notes Jupiter analyst Marissa Gluck – but with a few major caveats.

"CPG advertisers should avoid over-dependence on pay for performance ad buys," says Gluck. And as major users of pop-up advertising, CPGs should be cautious of consumer resistance to the format. CPGs spending on CPM and pay for performance deals is outpacing their spending on paid sponsorships online, partly a function of declining online ad rates. But if CPGs’ insistence on pay for performance deals kills off smaller online publishers, concentrating online advertising inventory in the hands of a few large outlets could create problems for advertisers down the road, Gluck notes.

Similarly, CPGs, already some of the biggest users of online rich media formats such as pop-ups, need to exercise restraint and targeting their use of rich media formats to make the ads effective. "41% of consumers claim they are so annoyed with pop-ups that the ads affect their decision to return to a site," notes Gluck. "CPGs must keep in mind that relevancy matters more than ubiquity online."


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