The days when advertising agencies could turn away dot.com clients because they had more business than they knew what to do with appear to be over. Dot.com ad spends in July were 44% down on the previous month, according to figures released by the media agency, Carat.

This is the first time that the drop in investor confidence in e-commerce has begun to make itself felt in the advertising world. Until this summer advertising expenditure by dot.com companies had been rising rapidly. The amount spent on advertising campaigns by dot.coms increased from £7 million or 1% of total advertising spend in August 1999 to £70 million or 8.3% in May 2000.

But by July it was back down to £37 million and 5.8% of all advertising expenditure. The drop meant that by July advertisers had to spend less than half of what they used to spend to have the same impact. The highest-spending dot.com advertiser in July was BT, which spend £2.7 million, and advertisers spending just £350,000 a month made it into the top 20.

"There was a lot of business promised at the beginning of the year that simply hasn't delivered," said Guy Abrahams, strategic director at Carat. "The effects of the Wall Street judders this March and the subsequent fall in investor confidence have resulted in greater scrutiny of previously generous advertising budgets. I think we will see another drop for August, which is always a quiet month for advertisers, then things will start to pick up."

The falls were by no means uniform across all media. While July's outdoor spend fell by 71% month on month (confirming outdoor's reputation as the first to benefit from boom and the first to suffer bust), press only fell by 30%.

This is possibly a reflection of the increasingly tactical nature of the market. The good news for advertising agencies is that things will get better, although we are unlikely to see the mega-rises of earlier this year.

Abrahams predicts year-on-year increases in dot.com ad spends of between 50% and 100% in the months leading up to Christmas. This will be made up partly of successful foreign e-commerce advertisers and partly of established, so-called "clicks and mortar" companies, which operate both on the web and on the high street.

This will, he says, make it increasingly difficult to classify dot.com advertisers as we see companies such as Woolworth's or Virgin advertising their stores and websites at the same time.