Jupiter & Media Metrix

ReportADVERTISINGMeasurement and Analysis of the B-to-B MarketAugust 2000

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Measurement and Analysis of the B-to-B MarketAugust 2000

Jupiter & Media Metrix This report is the first to combine measurement data from Media Metrix and its AdRelevance division with analyst insight from Jupiter research in order to provide a comprehensive resource to key decision makers in the online advertising and business-to-business markets.

This report is based on Media Metrix online advertising intelligence and audience measurement data, and Jupiter analyst interpretation of data,opinions on industry trends, and market forecasts surrounding the intersection of online advertising and the rapidly growing B-to-B market. The combination of measured consumer behavior, tracked online advertising inventory, and Jupiter analyst expertise provides a rich lens throughwhich to understand and anticipate the changes in the online advertising and B-to-B markets.

All sources of data for this report were collected at various points over the last 12 months. The AdRelevance data measure where, when, how, and how much Web marketers are advertising online, using AdRelevance’s patented intelligent-agent technology. All advertising impressions meas-ures are based on standard 468 x 60 banner advertisements and may include house ads. All spending figures are based on non-negotiated ratecard information and may include some house ads and barter impressions. For the purposes of this report, the US market is examined exclusively,and “mainstream online media” refers to the top 500 most visited ad-supported Web sites that the AdRelevance service measures, based onMedia Metrix data. Classifying over 300,000 unique ads to date and probing over five million pages per week, the AdRelevance Service captures virtually all commercial online ad spending.

More information on AdRelevance, Media Metrix, and Jupiter research methodologies can be found at their respective Web sites (www.adrelevance.com, www.mediametrix.com, and www.jup.com).

The B-to-B sector is only the first of many to which this analysis will be applied. AdRelevance provides the most comprehensive and accurate datafor tracking and analyzing online advertising across industries most critical for buyers and sellers of online media space. Jupiter, the worldwideauthority on Internet commerce, provides comprehensive analysis, forecasts, and insight into the online advertising market, as well as more than10 vertical industries. For a preview of this analysis applied to other industries, please visit http://advertising.jup.com.

Jupiter Related Research• Online Advertising: Workplace Targeting: Connecting with

Consumers During the New Prime Time, Volume 3, 2000• MindShare: The Business-to-Employee Model: Acquiring

Captive Audiences at Lower Cost, Volume 4, 2000• B-to-B Marketing: Beyond B-to-C, April 26, 2000• B-to-B Marketing: Net Markets: Positive Net Opportunities,

April 5, 2000

AdRelevance Related Research• Secrets of the B-to-B Ad Boom: Smart Advertisers Aim for

Eyeballs on the Job, March 2000• AdRelevance Rate Card and Ad Dimensions Report,

August 2000

Media Metrix Related Research• Digital Media Report, May 2000

Market Size: B-to-B Demonstrates Strong Rise in Online Advertising Impressions

JupTake“It is not just business-focused, industry-specificpublications that will win the growing B-to-B onlineadvertising market. Mainstream media sites havemuch to gain from this growing industry, earningfully 50 percent of this market’s potential revenuesover time.”

Jean-Gabriel Henry – Senior Analyst, B-to-B Marketing

B-to-B Online Advertising Impressions, 2Q 2000

Measurement Data

The B-to-B industry is the fastest growing online advertising segment in mainstream online media, growing from over one billion onlineadvertising impressions in third quarter 1999 to 5.6 billion in second quarter 2000.

Due to increased targeting capabilities online, Jupiter analysts believe that more B-to-B companies will continue to commit more oftheir advertising budgets to the Internet. And, fully 50 percent of online advertising spending by B-to-B companies will take place onmainstream online media such as Yahoo! and Business Week.

Online advertising networks make purchasing advertising inventory on a wider array of smaller sites more efficient than in the off-lineworld. As such, Jupiter analysts believe that the other 50 percent of B-to-B online advertising budgets will be spent on more focusedbusiness trade publications, such as Agriculture.com, and on Net Markets (online intermediaries that connect fragmented buyers andsellers, such as VerticalNet).

In comparison, roughly two-thirds of advertising spending by B-to-B companies in the traditional world takes place in mainstreammedia (e.g., Time Magazine), while the remainder is spent on business trade publications.

Analyst Insight1

Market Share: B-to-B Accounts for Growing Share of Online Advertising Impressions

Growing from five percent of total online advertising impressions in fourth quarter 1999 to eight percent of total online advertising impressions insecond quarter 2000, B-to-B online advertising is the fastest growing segment of online advertising.

At eight percent or 5.6 billion of total advertising impressions in mainstream online media, the B-to-B market is the fourth largest category ofonline advertising spending today, after Web media with 25.2 billion impressions, retail with 14.8 billion impressions, and financial services with 10.1 billion impressions in second quarter 2000.

Web media dominates the online advertising impressions landscape with a full 38 percent share of the total in second quarter 2000, thoughroughly half of this may be house advertising. Retail and financial services follow closely with 22 percent and 15 percent, respectively, for thesame time period.

JupTake“The B-to-B market’s share of online advertisingimpressions will only increase. We expect it to passthe 10 percent mark easily in third quarter 2000 andrival retail financial services for the number threespot in 2001.”

Patrick Keane – Director & Senior Analyst, Online Advertising

B-to-B Market’s Share of Online Advertising Impressions, 2Q 2000

2Measurement Data Analyst Insight

Market Growth: B-to-B Market Outpaces the Industry Average

Growth in total online advertising spending has slowed over the last several quarters, dropping from an incredible 92 percent quarterly growth ratein fourth quarter 1999 to a still-vibrant 15 percent in second quarter 2000, equivalent to 75 percent annual growth rate at the 15 percent per-quarter rate. Jupiter analysts believe that total online advertising spending will grow to $16.5 billion in 2005.

However, due to the relative immaturity of the B-to-B market and, therefore, its much smaller base of online advertising impressions, it is the fastestgrowing segment of online advertising. In fourth quarter 1999, its growth rate was just below the industry average at 89 percent; however, it haseasily surpassed the industry average with 94 percent growth in first quarter 2000, slowing to a still-incredible 54 percent in second quarter 2000,or, if second-quarter growth rates persist, 462 percent over the course of a year.

JupTake“Due to its relative immaturity and smaller currentbase of ad impressions, we believe that the B-to-Bmarket will maintain a faster growth rate than theoverall industry for the next three years.”

Vipul Patel – Director, Forecasting

Growth in B-to-B Online Advertising Spending

3Measurement Data Analyst Insight

B-to-B Segment Breakdown: Service Companies Dominate B-to-B Online Advertising

Today, service companies, such as Anderson Consulting, Federal Express, and Citicorp, represent 70 percent of online advertising spending by B-to-B companies on mainstream online media, while product companies, such as Sun, Grainger, and Xerox, represent only 30 percent.

Jupiter analysts believe that this 70:30 service to product company ratio will be maintained for the foreseeable future. Most service companies target a broader range of businesses with their services and, therefore, will continue to be the dominant B-to-B advertising spenders on sites withthe greatest reach.

To date, more online users are part of the target audience for service companies. As more of the B-to-B product companies’ target audiencescome online, these users will be found on more-focused business trade sites and on Net Markets. As such, Jupiter analysts believe that productcompanies will increase their online advertising spending on smaller, focused sites, rather than on mainstream online media, keeping the above ratio intact.

JupTake“We believe that B-to-B service companies willmaintain their 70 percent share of B-to-B advertis-ing spending on mainstream online media over thelong term. Targeting a wider audience, service companies—not product companies—will continueto dominate B-to-B advertising impressions on siteslike Yahoo! and Business Week.”

Jean-Gabriel Henry – Senior Analyst, B-to-B Marketing

Share of B-to-B Online Advertising Spending by Company Type,2Q 2000

4Measurement Data Analyst Insight

Market Driver: More B-to-B Companies Seeing Value in Online Advertising

A main driver in the growth of B-to-B online advertising spending is the number of companies shifting their advertising dollars to the Internet.Growth in the number of B-to-B companies embracing the Internet as an advertising vehicle is an amazing 10 percent per month today, rising from only 635 in January 2000 to over one thousand in June 2000.

Jupiter analysts believe that this number will continue to grow as more traditional B-to-B companies shift a portion of their advertising budgets tothe Internet. In addition, the number of new well-funded Net Markets and online-only companies will continue to grow, and they will use the Internetas one of their primary means of reaching target audiences.

As online advertising proves itself to be efficient and easily tracked, an increasing number of B-to-B companies—both online-only and traditional—will spend more of their advertising dollars online.

JupTake“With the number of well-funded Net Marketsgrowing and with fewer than 10 percent of themusing online advertising today, Net Markets will bea significant driver of future growth in the numberof B-to-B companies advertising online.”

John Katsaros – VP & Director, B-to-B Research

Number of B-to-B Companies Advertising Online

5Measurement Data Analyst Insight

Market Driver: B-to-B Companies Increase Commitment to Online Advertising

A significant driver of B-to-B online advertising spending is the amount spent per B-to-B company on online advertising. The monthly averageonline spending per B-to-B company has grown from approximately $47,000 in January 2000 to just over $53,000 in June 2000, while the averagefor the industry overall has remained relatively stagnant.

However, B-to-B advertising per company still pales in comparison to the industry average of approximately $91,000, and industry segment averagesvary widely. For instance, financial services companies advertising online spend approximately $285,000 per month while travel companiesadvertising online spend only approximately $36,000 per month.

Jupiter analysts believe that average monthly online advertising spending per B-to-B company will increase; however, it will remain on the lower endof the spectrum, as the top B-to-B advertising spenders, in general, have smaller total advertising budgets than do the top advertising spendersamong consumer-oriented businesses.

The rapid increase in spending per company, the relative lack of sophistication of B-to-B companies with regard to online advertising, and theheightened demand for targeting in this market will drive increased demand for services provided by publishers, agencies, and other advertisingsupport players.

JupTake“While monthly online advertising spending by B-to-Bcompanies will continue to grow, we believe that itwill never approach that of the industry average ofapproximately $91,000.”

Michele Slack – Senior Analyst, Online Advertising

Average Monthly Online Advertising Spending per B-to-B Online Advertiser

6Measurement Data Analyst Insight

Publisher Dynamics: B-to-B Online Advertising Widely Distributed Across Publishers

Today, 80 percent of online advertising spending by B-to-B companies goes to 25 sites. This represents a wider distribution of the advertising pie across publishers compared to other, more mature industry segments. For example, financial services companies spend 80 of their onlineadvertising dollars on only eight sites, and retailers spend 80 percent of their online advertising budgets on only 10 sites.

The number of sites that earn 80 percent of the advertising revenue in these markets is indicative of the total number of publishers that receive advertisingimpressions in a particular industry. Jupiter analysts believe that even though the B-to-B market is immature relative to the financial services andretail industries, B-to-B ad spending will become even more fragmented in the future, as hundreds of vertically oriented sites and Net Marketsdevelop critical mass and emerge as viable advertising platforms.

The fragmented nature of the B-to-B market necessitates that these companies seek their target audience at a wide range of sites. Jupiter analystsbelieve that this is good news for publishers of all kinds, as many sites will participate in the revenue potential of this rapidly growing industry and itsonline advertising spending.

JupTake“Even as the B-to-B market matures, we believethat online advertising by these companies willbecome even more widely distributed acrossnumerous publishers’ sites due to the fragmentednature of the B-to-B marketplace.”

Ken Allard – VP & Group Director, Technology and Operations Research

Number of Sites That Get 80 Percent of Online AdvertisingImpressions by Industry, 2Q 2000

7Measurement Data Analyst Insight

Publisher Revenue by Industry: Those Publishers That Win in B-to-B, Win Big

The top publishers benefiting from B-to-B online advertising in second quarter 2000 each earned $5 million on average. This is an impressivereturn, given that spending by B-to-B companies is far more widely distributed across publisher sites than that of other industries.

Jupiter analysts believe that while the distributed nature of B-to-B online advertising spending will bring more and more publishers into the fold, thegrowth in online advertising spending by these companies will continue to drive greater revenue for the most successful publishers in this category.

Today, for top publishers in a particular category, the B-to-B market ranks third in terms of average quarterly revenue. The retail and financial servicesindustries offer much larger average quarterly revenue returns to the top publishers in those advertising spending categories, approximately $30 millionand $25 million, respectively. However, these big wins go to a much smaller number of sites (10 and eight, respectively).

JupTake“It is well worth it for publishers to spend the timeand money to target B-to-B online advertisers. Notonly is the segment the fastest growing today, but itis also one of the most financially rewarding for thetop publishers in the category.”

Claudine Singer – Senior Analyst, Online Advertising

Average Quarterly Advertising Revenue Earned per Top Publisher*, 2Q 2000

8Measurement Data Analyst Insight

*Top publishers are the set of sites that generate 80 percent of advertisingimpressions within a particular industry segment.

Advertising Impressions by Publisher: Early Success in B-to-B Matches Overall Industry

The largest volume of B-to-B online advertising impressions is on the same sites that lead overall advertising impressions, including MSN andYahoo!. While Jupiter analysts believe that B-to-B companies are wise to seek the reach that these highly trafficked sites offer, we also believe thatin the future B-to-B companies will seek more focused sites that reach a more targeted audience, even if in smaller quantities. Sites with a higherpercentage of their audience from work or with more business-focused content will likely threaten the ranks of today’s top B-to-B publishers, asranked by B-to-B advertising impressions.

In addition, mainstream online media will have to fight the onslaught of business trade publications and Net Markets as attractive online advertisingopportunities for B-to-B companies, particularly product companies. VerticalNet’s early success in winning online advertising revenue from B-to-Bcompanies is just one example of the coming competition for this growing market. In second quarter 2000, VerticalNet earned over $20 million inonline advertising revenue—made up largely of online storefronts and sponsorships, rather than banner ads.

JupTake“Competition for B-to-B online advertising dollarswill come from Net Markets due to their ability tooffer targeted advertising opportunities to ready-to-buy users. Mainstream online media must improvetheir ability to deliver personalized advertising totarget B-to-B audiences to maintain their share ofthis growing market.”

Tim Clark – Senior Analyst, Net Markets

Sites with Highest Number of B-to-B Advertising Impressions, 2Q 2000

9Measurement Data Analyst Insight

Publishers with Potential: High Percentage of Audience from Work Indicates Potential B-to-B Success

Few highly trafficked sites have a high percentage of their users coming from work. In fact, among the Media Metrix top 200 sites for May 2000,only MarketWatch.com reaches the 50 percent mark. However, many news, local content, and travel sites, such as CNN.com, CitySearch, andTravelocity, win a significant portion of their audience from the office.

Jupiter analysts believe that while currently none of these sites are the top publishers in the B-to-B online advertising category, they have significant potential in helping B-to-B advertisers target the at-work audience.

While many of these sites are largely for personal Internet use at work, their audiences comprise a significant number of users who are at theoffice and often making purchasing decisions, making these some of the sites with the most promise of participating in the future growth of B-to-Bonline advertising spending.

JupTake“Many sites that have a high percentage of usersfrom work are often geared toward personal use ofthe Internet while at the office. However, the workaudience is a key target for B-to-B advertisers, andwe believe that these sites are well positioned towin the online advertising dollars of many B-to-B—particularly service-oriented—companies.”

Marc Johnson – VP & Group Director, Marketing and Media Research

Sites That Accept Advertising with Highest Percentage of UniqueVisitors from Work, Media Metrix Top 200, May 2000

10Measurement Data Analyst Insight

Source: Media Metrix, May 2000

About Media Metrix About Jupiter Communications

Media Metrix, Inc., with more than 900 clients, is the leader and pioneer in Internet and DigitalMedia measurement and the industry’s sourcefor the most comprehensive, reliable, and timelyaudience ratings, e-commerce, advertising andtechnology measurement services. MediaMetrix’s AdRelevance division, through its superior ad trackingtechnology, provides clients the most comprehensive data onwhere, when, how and how much Web marketers and theircompetition are advertising online.

Media Metrix has worldwide majority-owned operations throughpartnerships with media and market research leaders aroundthe world. Media Metrix’s European affiliate, known as MMXIEurope, operates in France, Germany, Sweden and the UnitedKingdom. Media Metrix also operates in Australia, Canada,Japan, Latin America and the United States. The Company provides advertising agencies, media companies, e-commercemarketers, financial services and technology companies withthe most comprehensive coverage of all digital media (includingmore than 21,000 Web sites and online properties). MediaMetrix utilizes its patented, superior operating-system meteringmethodology to track Internet and Digital Media audience usagebehavior in real-time – click-by-click, page-by-page, minute-by-minute. Media Metrix has a sample of more than 100,000 people under measurement worldwide, yielding monthly, weekly,and daily data collection and reporting. For more information onMedia Metrix visit www.mediametrix.com.

Jupiter Communications, the worldwide authority on Internet commerce, provides strategic analysis and insight to give businessesa competitive advantage in a complex and rapidly changingInternet economy. Jupiter provides its business-to-businessand business-to-consumer clients with comprehensive views ofindustry trends, accurate forecasts and today’s best practices,all backed by proprietary data. Jupiter’s research and advisoryservices, offered on a continuous subscription basis, providewritten analysis, supportive data and access to expert analysts.

Jupiter offers a comprehensive view of Internet commerce by providing expert analysis of Internet Strategies (focused on broad business issues) and Market Strategies (focused onindustry and region-specific issues).

Jupiter Communications also produces a wide range of conferences that offer senior executives the opportunity to hear firsthand the insights of its analysts and the leading decision-makers in the Internet and technology industries.Jupiter Communications is based in New York City, with operations in London, San Francisco, Stockholm, Sydney andTokyo. For more information on Jupiter Communications visitwww.jup.com.

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