Internet advertising will soon become much more attractive to entrepreneurial businesses, indicates a new report from Forrester Research Inc.There are two main reasons. First, lower cost-per-thousand rates, driven by excess advertising space inventory, will make the Web more affordable. Second, new technology will significantly improve accountability for on-line advertising.

What does this mean for you as an advertiser?

1. Pay for Performance. More sophisticated tracking tools will allow you to really know what hits and what misses at the sites you advertise on. By 2004, Forrester predicts, 53% of online ad spending will be based on performance.

2. Better Deals from Non-Web Advertising Media. The Web will siphon away 10%, or $27 billion, of all U.S. and spending from traditional media, Forrester predicts. Hardest hit will be newspapers and direct mail, which may lose as much as 18% of their expected revenues by 2004.

What to Do

• Plan your advertising carefully. Businesses have more options to generate dollars from advertising than ever before. Begin now to learn what works on the Web and what doesn’t.

• Don’t delay just because you must start small. Valid test results can be a big advantage over the next few years because the nature of Web transactions and marketing techniques change frequently. Successful Web advertisers will have a variety of tools to choose from.

Tip: To get your testing right, consult traditional direct marketers. These people have lived and died on test results for decades.

• Shop for the best deals in any media. Consider not only cost and reach but also accountability based on new technology.