RealTime IT News

Slowly, Surely, Internet Advertising Climbs

Internet advertising's comeback is progressing quite nicely.

Industry revenue for the second quarter of 2003 was $1.66 billion, up 14 percent from the same period a year ago, and nearly 2 percent higher than in the first quarter. That's according to the Interactive Advertising Bureau's (IAB) regular Internet Ad Revenue report, which it conducts with PricewaterhouseCoopers. Numbers for the first half of the year show U.S. Internet advertising bringing in $3.3 billion, which is 10.5 percent higher than the same period in 2002.

The numbers quantify the positive feeling that's infused the industry in recent months, as forecasters have begun to predict a recovery and major publishers have reported profits.

"Our prognosis for a continued and steady recovery is being realized and the outlook remains bright," said Greg Stuart, president and CEO of the IAB. "With Internet usage and broadband adoption continuing to escalate, marketers are throwing their weight and dollars behind interactive advertising."

Revenues from industry darling paid search rose sharply in the second quarter, while display advertising continued its decline. Paid search revenues accounted for 31 percent of second-quarter revenues, up from 9 percent in the same period in 2002. Display advertising, a category the researchers formerly called "ad banners," was responsible for only 22 percent of total revenues in the second quarter, down from 33 percent in the year-ago period. Sponsorship revenues were on the decline, too. They fell from 24 percent of total revenues in 2002 to just 11 percent in 2003. Classified advertising was another bright spot, up to 18 percent of total revenues, compared to 15 percent in the second quarter of 2002.

The biggest ad sellers continued to hold on to the biggest chunk of the dough, but there seemed to be a little more distribution of wealth. The top ten companies accounted for 70 percent of total revenues in the second quarter of 2003, down from 76 percent in the same period in 2002. The top 50 companies accounted for 95 percent of total Q2 revenues this year.

Consumer advertisers made the biggest investment online, accounting for 35 percent of total spending. That's up from 32 percent for the same period in 2002. Of those, retail and automotive companies were the biggest spenders. Retailers accounted for 44 percent of the consumer-related revenues in Q2 2003, and automotive companies spent 20 percent. Next came entertainment, at 15 percent of consumer-related revenues. Travel and hotels accounted for 13 percent of revenues in the second quarter. Consumer packaged goods, a category the IAB just added in 2003, came in at 8 percent of consumer-related spending.

Computer-oriented advertisers ranked next after consumer goods, accounting for 20 percent of total revenues, up slightly from 19 percent in the second quarter of last year. Financial services advertisers came in at 13 percent of total spend, down a percentage point from the same period in 2002. Media companies accounted for 12 percent of Q2 revenues, and business services firms spent 10 percent.

All of that spending was increasingly taking place via performance-based deals (i.e. cost-per-click, cost-per-action or straight revenue share). In 2002, only 15 percent of deals were performance-based, but that number grew to 35 percent in 2003, probably due to the popularity of paid search. CPM, or impression-based, pricing still dominated, however. Forty-five percent of second-quarter revenues were priced on an impression basis, down slightly from 46 percent in the year-ago period. Hybrid deals also declined, but more sharply. Only 20 percent of 2003 second-quarter revenues were hybrid deals, compared to 39 percent in 2002.