Changewave Research: Corporate Online Marketing & Advertising

ChangeWave Research: Corporate Online Marketing & Advertising

ChangeWave Research Report:

Corporate Online Marketing & Advertising

Marketing/Advertising BudgetsSet to Increase in 3rd Quarter; Google Gains Market Share

Overview

During the week of July 6 - 11, 2005 we surveyed ChangeWave Alliance members involved in or knowledgeable about marketing/advertising decisions for their organization. A total of 364 members participated.

Bottom Line:In a highly bullish sign,overall marketing/advertising budgets appear set to increase in the 3rd Quarter compared to last quarter – especially amongorganizations that use the Web and Email as their primary type of marketing and advertising.

Two-in-five respondents (40%) report their organization now advertises via Email and 34% via Search Engines – while the top three online advertising tools used are Text Links, Solo Product Emails and Banner Ads.

Over the past 12 months, Google (41%)has gained the most market share regarding online marketing/advertising by respondent organizations, with Yahoo (24%) second. Looking ahead over the next 12 months, Google(38%) also looks to gain the most market share, with Yahoo (15%) coming in a far distant second.

More than a quarter of respondents report their organizations use some type of Third Party Marketing/Advertising services, with Doubleclick and Fastclick ranking as the top twoservice providers.

(A) Corporate Online Marketing & Advertising

Budgets Increasing. A total of 39%of respondents think their organization’s overall Marketing/Advertising budget will increase in the 3rd Quarter compared to last quarter – while only 4% think they’ll see a decrease and 2% no spending. The results are even more bullish for organizations that use Web and Email as their primary type of marketing and advertising (46% increase).

Online Advertising.Two-in-five respondents (40%) report their organization advertises via Email and 34% via Search Engines – while the top three online advertising tools used are “Text Links” (56%) to their site or ad, “Solo Product Emails” (29%) and “Banner Ads” (20%).

Google Gains Online Marketing/AdvertisingShare.Over the past 12 months,respondents say Google (41%) has gained the most market share with their organizations in terms of online marketing/advertising. Yahoo (24%; including Overture) came in second.

Next 12 Months –Who WillGainthe Most Marketing/Advertising Share. Google (38%) also looks to gain the most market share with Alliance member companiesover the next 12 monthsin terms of online advertising/marketing. Yahoo (15%; including Overture) comes in a distant second.
Third Party Marketing/AdvertisingServices. One in four respondent organizations (26%) use some type of Third Party Marketing/Advertising services for their online advertising. Over the past 12 months, the top third party service provider in terms of gained market share was Doubleclick (Net Difference Score = +5). Fastclick (+4) was a close second.

(B) Use of Online Shopping Sites to Sell Products and Services

Selling via Online Shopping Sites. A relatively small subset of respondent organizations (11%) report using “Online Shopping Sites” to sell their products and services. Among this group, eBay (41%)holds a slight lead over Amazon (37%) in terms of current usage, with Yahoo! Shopping (20%) ranking third.

eBay the Biggest Market Share Gainer.Over the past 12 months,eBay (Net Difference Score = +17) has gained the most market share by far among Alliance member companies who sell their products online, with Yahoo! Shopping (+10) coming insecond. Amazon (+2) came in surprisingly weak in terms of gained market share, ranking a far distant third.

Summary of Key Findings

The ChangeWave Alliance is a group of 5,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 2

The Findings...... 4

(A) Corporate Online Marketing & Advertising...... 4

(B) Use of Online Shopping Sites to Sell Products and Services...... 10

ChangeWave Research Methodology...... 12

About ChangeWave Research...... 13

I. The Findings

(A) Corporate Online Marketing & Advertising

Respondents Involved in or Knowledgeable about Marketing/Advertising Decisionsfor their organization (n=364)

(1) Question Asked: With regard to your organization's Marketing/Advertising budget (including online advertising), do you think you'll see an increase in Marketing/Advertising spending, a decrease, or will Marketing/ Advertising spending remain the same for the 3rd Quarter (Jul-Sep) 2005 vs. the previous quarter? (n=364)

Total / Orgs that Use
Web/Email as
Primary Type
ofMarketing/
Advertising
Increase in 3rd Quarter / 39% / 46%
Decrease in 3rd Quarter / 4% / 5%
No Spending in 3rd Quarter / 2% / 4%
Remain the Same / 54% / 44%
Don't Know / 1% / 1%

Budgets Increasing. A total of 39% of respondents think their organization’s overall Marketing/Advertising budget will increase in the 3rd Quarter compared to last quarter – while only 4% think they’ll see a decrease and 2% no spending. The results are even more bullish for organizations that use Web and Email as their primary type of marketing and advertising (46% increase).

(2) Question Asked: Which of the following is your primary type of marketing and advertising? (n=364)

Customer Referral / 23%
Advertising via the Web / 13%
Print Advertising in Trade Magazines / 12%
Direct Mail / 11%
Advertising via Email / 9%
Event or program sponsorships / 8%
Print Advertising in Newspapers/National magazines / 7%
TV: Local or National / 5%
Radio: Local or National / 2%
Inserts / 2%
Do not Market or Advertise / 3%

Primary Types of Marketing and Advertising. Nearly a quarter of respondents (23%) say “Customer Referral” is their primary type of marketing and advertising. “Advertising via the Web” (13%), “Print Advertising in Trade Magazines” (12%) and “Direct Mail” (11%) also received double digit mention.

(3) Question Asked: Which of the following types of online advertising – if any – does your organization use to market its products and/or services? (Check All That Apply) (n=364)

Advertising via Email / 40%
Advertising via Search Engines / 34%
Affiliate Marketing / 18%
Buying Web Ad and/or Email Ad Space from Other Companies / 14%
Webinars / 10%
Blogs/RSS Feeds / 5%
Do not Use Online Web and/or Email Marketing/Advertising. / 31%
Don't Know / 3%

Online Advertising.Two-in-five respondents (40%) report their organization advertises via Email and 34% via Search Engines.

(3A) Question Asked: Which of the following types of online advertising tools (creative mediums) does your organization use? (Check All That Apply)(n=250)

Text Links to your Site or Ad / 56%
Solo Product Emails / 29%
Banner Ads / 20%
Rich Media (streaming) / 8%
Content Feeds / 8%
Pop-up and Pop-under Ads / 6%
Video Ads (ECU) / 6%
Don't Know / 6%

*Note:”Do not use Online Web and/or Email Marketing/Advertising” has been removed.

With regards to online advertising tools used, 56% report using “Text Links” to their site or ad, 29% “Solo Product Emails” and 20% “Banner Ads.”

These next few questions focus on where respondent organizationsare spending their actual online advertising/marketing dollars.

(4A) Question Asked: Over the past 12 months, which of the following companies have been gaining market share in terms of your organization's spending on online advertising/marketing? (Check All That Apply)(n=229)

Google (GOOG) / 41%
Yahoo (including Overture; YHOO) / 24%
MSN (MSFT) / 9%
eBay (EBAY) / 6%
AOL (TWX) / 4%
Amazon (AMZN) / 3%
CNET (CNET) / 3%
InfoSpace (INSP) / 3%
Ask Jeeves (ASKJ) / 2%
FindWhat.com (MIVA Inc.)(FWHT) / 2%
Looksmart (LOOK) / 2%
Marketwatch (DJ) / 2%
Industry Brains / 1%
Don't Know / 21%

*Note: ”Do not use Online Web and/or Email Marketing/Advertising” has been removed.

Google Gains Online Marketing/Advertising Share. Over the past 12 months,respondents say Google (41%) has gained the most market share with their organizations in terms of online marketing/advertising. Yahoo (24%; including Overture) came in second.

(4B) Question Asked: Looking ahead, which of the following companies will be gaining market share in terms of your organization's spending on online advertising/marketing over the next 12 months?(Check All That Apply) (n=240)

Google (GOOG) / 38%
Yahoo (including Overture; YHOO) / 15%
MSN (MSFT) / 7%
eBay (EBAY) / 6%
AOL (TWX) / 3%
Amazon (AMZN) / 3%
Ask Jeeves (ASKJ) / 3%
CNET (CNET) / 3%
FindWhat.com (MIVA Inc.)(FWHT) / 1%
InfoSpace (INSP) / 1%
Marketwatch (DJ) / 1%
Industry Brains / 0%
Looksmart (LOOK) / 0%
Don't Know / 34%

*Note:”Do not use Online Web and/or Email Marketing/Advertising” has been removed.

Next 12 Months –Who WillGainthe Most Marketing/Advertising Share. Google (38%) also looks to gain the most market share with Alliance member companiesover the next 12 months in terms of online advertising/marketing. Yahoo (15%; including Overture) comes in a distant second.

(5) Question Asked: Does your organization use any third party Marketing/Advertising services for your Online advertising? (n=364)

Yes, We Use Third Party Marketing/Advertising Services for Email and/or Web / 13%
Combination of Third Party and In-House / 13%
No, We Use In-House Marketing/Advertising for Email and/or Web / 37%
Do not do any Web or Email Online Marketing/Advertising / 33%
Don't Know / 3%

Third Party Marketing/AdvertisingServices. One in four respondent organizations (26%) use some type of Third Party Marketing/Advertising services for their online advertising.

(5A) Question Asked: Over the past 12 months, which of the following vendors – if any – have you purchased Online Marketing/Advertising services from? (Check All That Apply) (n=94)

Doubleclick (DCLK) / 10%
InterActive Corp. (IACI) / 4%
Fastclick (FSTC) / 4%
Traffix (TRFX) / 3%
ValueClick (VCLK) / 3%
Thomas Register** / 3%
Interpublic Group of Companies (IPG) / 2%
24/7 Real Media (TFSM) / 1%
aQuantive (AQNT) / 1%
Interchange (INCX) / 1%
Netease.com Ads (NTES) / 1%
Alloy Inc (ALLOY) / 0%
Digitas, Inc. (DTAS) / 0%
WWP Group (WPPGY) / 0%
Do not Use any Third Party Web or Email Marketing/Advertising Services / 4%
Do not do any Web or Email Online Marketing/Advertising / 6%
Don't Know / 30%

*This question was calculated out of respondents who said “Yes, We Use Third Party Marketing/Advertising Services for Email and/or Web” or “Combination of Third Party and In-House.”

**Taken from "Other" responses

(5B) Question Asked: Over the past 12 months, which of the following companies have been gaining market share in your organization in terms of providing third party Marketing/Advertising services for your Online Marketing/Advertising?(Check All That Apply) (n=94)

Doubleclick (DCLK) / 6%
Fastclick (FSTC) / 4%
ValueClick (VCLK) / 3%
InterActive Corp. (IACI) / 2%
Interpublic Group of Companies (IPG) / 2%
24/7 Real Media (TFSM) / 1%
aQuantive (AQNT) / 1%
Traffix (TRFX) / 1%
Alloy Inc (ALLOY) / 0%
Digitas, Inc. (DTAS) / 0%
Interchange (INCX) / 0%
Netease.com Ads (NTES) / 0%
WWP Group (WPPGY) / 0%
Do not Use any Third Party Web or Email Marketing/Advertising Services / 4%
Do not do any Web or Email Online Marketing/Advertising / 6%
Don't Know / 40%

*This question was calculated out of respondents who said “Yes, We Use Third Party Marketing/Advertising Services for Email and/or Web” or “Combination of Third Party and In-House.”

(5C) Question Asked: Over the past 12 months, which of the following companies have been losing market share in your organization in terms of providing third party Marketing/Advertising services for your Online Marketing/Advertising?(Check All That Apply) (n=94)

Traffix (TRFX) / 2%
24/7 Real Media (TFSM) / 1%
aQuantive (AQNT) / 1%
Doubleclick (DCLK) / 1%
InterActive Corp. (IACI) / 1%
Interpublic Group of Companies (IPG) / 1%
ValueClick (VCLK) / 1%
Alloy Inc (ALLOY) / 0%
Digitas, Inc. (DTAS) / 0%
Fastclick (FSTC) / 0%
Interchange (INCX) / 0%
Netease.com Ads (NTES) / 0%
WWP Group (WPPGY) / 0%
Do not Use any Third Party Web or Email Marketing/Advertising Services / 5%
Do not do any Web or Email Online Marketing/Advertising. / 3%
Don't Know / 56%

*This question was calculated out of respondents who said “Yes, We Use Third Party Marketing/Advertising Services for Email and/or Web” or “Combination of Third Party and In-House.”

Net Difference Score

Gaining
Market
Share / Losing
Market
Share / Net
Difference
Score
Doubleclick (DCLK) / 6% / 1% / +5
Fastclick (FSTC) / 4% / 0% / +4
ValueClick (VCLK) / 3% / 1% / +2
InterActive Corp. (IACI) / 2% / 1% / +1
Interpublic Group of Companies (IPG) / 2% / 1% / +1
Interchange (INCX) / 0% / 0% / 0
Netease.com Ads (NTES) / 0% / 0% / 0
24/7 Real Media (TFSM) / 1% / 1% / 0
Alloy Inc (ALLOY) / 0% / 0% / 0
aQuantive (AQNT) / 1% / 1% / 0
Digitas, Inc. (DTAS) / 0% / 0% / 0
WWP Group (WPPGY) / 0% / 0% / 0
Traffix (TRFX) / 1% / 2% / -1

Over the past 12 months, the top third party service provider in terms of gained market share was Doubleclick (Net Difference Score = +5). Fastclick (+4) was a close second.

(B) Use of Online Shopping Sites to Sell Your Company’s Products and Services

(6) Question Asked: Which of the following online shopping sites does your organization use to sell its products and services? (Check All That Apply)(n=41)

eBay / 41%
Amazon.com / 37%
Yahoo! Shopping / 20%
Froogle / 12%
AOL / 7%
Shopping.com / 5%
Nextag / 2%
Overstock.com / 2%
Shop.com / 2%
Shopzilla / 2%
Alloy Inc / 0%
Your own proprietary web site / 49%
Don't Know / 5%

Selling via Online Shopping Sites. A relatively small subset of respondent organizations (11%) report using “Online Shopping Sites” to sell their products and services. Among this group, eBay (41%) holds a slight lead over Amazon (37%) in terms of current usage, with Yahoo! Shopping (20%) ranking third.

(6A) Question Asked: Over the past 12 months, which of the following online shopping sites has gained market share in terms of total sales of your organization's products and services? (Check All That Apply) (n=41)

eBay / 24%
Amazon.com / 12%
Yahoo! Shopping / 10%
Froogle / 2%
Shopping.com / 2%
Alloy Inc / 0%
AOL / 0%
Nextag / 0%
Overstock.com / 0%
Shop.com / 0%
Shopzilla / 0%
Your own proprietary web site / 39%
Don't Know / 22%

(6B) Question Asked: Over the past 12 months, which of the following online shopping sites has lost market share in terms of total sales of your organization's products and services? (Check All That Apply) (n=41)

Amazon.com / 10%
eBay / 7%
Froogle / 5%
AOL / 2%
Alloy Inc / 0%
Nextag / 0%
Overstock.com / 0%
Shop.com / 0%
Shopping.com / 0%
Shopzilla / 0%
Yahoo! Shopping / 0%
Your own proprietary web site / 12%
Don't Know / 46%

Net Difference Score

Gained
Market
Share / Lost
Market
Share / Net
Difference
Score
eBay / 24% / 7% / +17
Yahoo! Shopping / 10% / 0% / +10
Amazon.com / 12% / 10% / +2
Shopping.com / 2% / 0% / +2
Alloy Inc / 0% / 0% / 0
Nextag / 0% / 0% / 0
Overstock.com / 0% / 0% / 0
Shop.com / 0% / 0% / 0
Shopzilla / 0% / 0% / 0
AOL / 0% / 2% / -2
Froogle / 2% / 5% / -3

eBay the Biggest Market Share Gainer. Over the past 12 months,eBay (Net Difference Score = +17) has gained the most market share by far among Alliance member companies who sell their products online, with Yahoo! Shopping (+10) coming in second. Amazon (+2) came in surprisingly weak in terms of gained market share, ranking a far distant third.

II. ChangeWave Research Methodology

This report presents the findings of a recent ChangeWave Alliance survey on Corporate Online Marketing & Advertising. The survey was conducted fromJuly 6 - 11, 2005 and a total of 364Alliance membersinvolved in or knowledgeable about marketing/advertising decisionsfor their organizationparticipated.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

III. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 5,000-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 5,000Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

For More Information:

ChangeWave ResearchTelephone: 301-279-4200

9420 Key West AvenueFax: 301-610-5206

Rockville, MD20850

Helping You Profit From A Rapidly Changing World ™

This information is from ChangeWave Research, LLC and contains confidential business information.