labels: Marketing, Market research
Online ad revenues in the US breach $21 billion mark news
16 May 2008

New York: Online ad revenues breached the $21-billion mark last year, according to a report by the Interactive Advertising Bureau, co-developed with consulting firm Pricewaterhouse Coopers.

According to The 2007 Internet Advertising Revenue Report, last year online ad revenue climbed to $21.2 billion, up 26 per cent from 2006, and marks a record high. However, that is lower than the spike seen between 2005 and 2006, which saw the graph touch 35 per cent. Even then, online advertising continues to outpace the growth of traditional advertising.

Conducted by the New Media Group of PricewaterhouseCoopers, the Internet Advertising Revenue Report was launched in 1996 by the IAB, and aggregates data from all companies that report meaningful online advertising revenues. Data is compiled directly from information supplied by companies selling advertising on the Internet, resulting in the report to be reputed for its accuracy.

The survey includes data concerning online advertising revenues from websites, commercial online services, free e-mail providers, and all other companies selling online advertising.

The IAB sponsors the Internet Advertising Revenue Report, which is conducted independently by the New Media Group of PwC. The full report is issued twice yearly for full and half-year data, and top-line quarterly figures are issued for the first and third quarters.

The report says that fourth quarter Internet advertising revenues in 2007 hit $5.9 billion, representing historic revenues for a single quarter, and a 24 per cent increase over the same period in 2006. This is the fourth consecutive year and thirteenth consecutive quarter of record results. The report quoted Randall Rothenbert, president and chief executive officer of the IAB, as saying "This achievement is a testament to the continued vitality of interactive. Explosive innovation in the industry is providing marketers with new and unique ways to reach consumers,"

At 41 per cent, search commands online marketing as the largest category of online ads. Display is the next biggest, at 21 per cent. Classified ads was next, drawing 16 per cent of online ad spend, with 'lead generation' accounting for only seven per cent, ostensibly on the back of law enforcement actions against unscrupulous lead generation companies. The report says that last year, marketers spent 2 per cent of their online ad spend on digital, making Web video significantly attractive to ad revenue.

Consumer advertisers remained the largest category contributing to Internet advertising spending, at 55 per cent of 2007 full-year revenues, up from 52 per cent from the full year 2006.

"Despite the current state of economic uncertainty, 2007 was another record year and the thirteenth consecutive record quarter. Interactive advertising is not just the future, it is the here and now, as it represents a meaningful and growing component of U.S. advertising and marketing spend," said David Silverman, partner, Assurance, PricewaterhouseCoopers.

Advertising formats 2007 2006
Type of Advertising $ % share of market $ % share of market
Display Advertising 4,455 21% 3,685 22%
Sponsorship 636 3% 496 3%
Rich Media (06 including Broadband Video) 1,657 8% 1,192 7%
Digital Video (07 only) 324 2%  - 21%
All Display 7,072 34% 5,373 32%
Keyword Search 8,805 41% 6,799 40%
Classifieds 3,321 16% 3,059 18%
E-mail 424 2% 338 2%
Lead Generation* 1,584 7% 1,310 8%
TOTALS 21,206 100% 16,879 100%

Industry concentration  FY 2007 FY 2006
Top 10 69% ($14,632) 69% ($11,647)
Top 25 80% ($16,965) 82% ($13,841)
Top 50 89% ($18,873) 92% ($15,529)

Pricing models  FY 2007 FY 2006
CPM or Impression 45% ($9,492) 48% ($8,102)
Performance Deals 51% ($10,817) 47% ($7,933)
Hybrid 4% ($897) 5% ($844)

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Online ad revenues in the US breach $21 billion mark