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January 14, 1997updated 05 Sep 2016 1:08pm

INTERNET IS TO BECOME THE NEXT MASS MEDIUM, SAYS ANALYST

By CBR Staff Writer

Morgan Stanley & Co’s Internet and new media analyst Mary Meeker has produced a pretty upbeat annual report on the state of Internet advertising. The analyst reckons that in time, the Internet could prove to be the next mass medium, embraced faster by users than newspapers, magazines, radio, broadcast and cable television. The last of those provides the closest model for the Internet, with brand names, channel expertise and revenue driven from advertising and premium pricing models, with America Online Inc in the lead on this front. By playing with some figures and adding some spin, Morgan Stanley reckons that by the year 2000, when it reckons there will be about 152 million Internet users, the Internet advertising market could be worth anything between $3.8bn, assuming an advertising-spending-per- user estimate of $25 (that’s the amount each advertiser spends each year to target each user – it’s currently estimated to be about $9), and up to $7.6bn, with a spending-per-user estimate of about $50. The analyst believes that these per-users estimate ramp-ups are justified because not only will the medium expand but it will also become better understood.

Conservative guesstimates

Whether or not these turn out to be conservative guesstimates, advertising on the Internet could be one big honkin’ business opportunity! as Meeker put it. One of the possible roadblocks on this part of the superhighway could be the lack of a standard ratings procedure, which could dent the confidence of potential advertisers until they can be certain that a trusted third party is collating the information, as happens in other media. Ironically, the NBC National Broadcasting Corp and Fox Industries Inc recently claimed that the Nielsen Media Research ratings for US television audiences, so long relied upon, were now inaccurate because Nielsen claimed the television companies were losing viewers to Internet and online service providers. The broadcast networks could end up owing advertisers tens of millions of dollars for lost airtime. The Federal Communications Commission is currently investigating the case. Meeker also predicts that Web commerce companies like Amazon.com, which sells books, and Cisco Systems Inc’s Connection Online will continue to show strong revenue growth through this year. The Cisco story is particulalry interesting, as it recently indicated that it had won $75m sales in five months through its site, and expects that to jump to $1bn by midway through this year. That would be about 30% of its total revenues sold via the Web, with all the inherent margin improvements that brings. Meeker expects the appreciation of the worth of having a good cyberbrand to become more pronounced, with the leaders being America Online, the joint venture National Broadcasting Corp-Microsoft Corp MSNBC television news channel, CNET Inc and Yahoo Inc. The demise, or low-price acquisition of several Web-based publishers is also predicted for this year, due to high cash burn and lack of revenue growth, and by the second and third quarters what is working in terms of Internet advertising will become clearer. Rounding up, Meeker looks for analogies between the Internet and the other five media that have developed in the US: newspapers, magazines, radio, broadcast TV and cable TV and concludes we’ve been there, done that already.

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