First-Half Online Ad Revenue Up 40%

NEW YORK Internet ad revenue rose nearly 40 percent to $4.6 billion in the first half compared to the year-ago period, according to a report released today. For the second quarter, online ad revenue was $2.37 billion, up almost 43 percent from $1.66 billion during the same period of last year and 6 percent from $2.23 billion in the first quarter.

The figures are from the Interactive Advertising Bureau-sponsored Internet Revenue Report, conducted independently by the New Media Group of PricewaterhouseCoopers.

Search advertising continued in its popularity, representing 40 percent of total online ad revenues for the second quarter. That translates to $947 million, up 97 percent from $481 million in Q2 2003.

The form of advertising, in which companies pay for a favorable spot or more frequency in search-result listings, increased its stake by more than a third over last year, taking share away from display advertising, rich media and sponsorships.

While rich media claimed $189 million in the second quarter, up from $149 million in the year-earlier period, its share of total online dollars fell slightly to 8 percent from 9 percent. The drop came despite broadband penetration, which allows for more opportunities for ads that deliver sound and video, hitting more than 50 percent of U.S. households this year.

Year-over-year spending on display advertising rose 24 percent to $474 million in the second quarter. Yet, the ad form’s share of total ad dollars declined to 20 percent from 23 percent in the year-ago quarter.

Sponsorships made up 9 percent, or $213 million, of Internet ad revenue in the second quarter; its share was down from 12 percent in Q2 2003. E-mail, referrals and slotting fees each accounted for 2 percent, or $47 million.

The study also found that consumer goods advertisers continued to spend the most dollars online, representing 49 percent of all Web advertising. The computing category comprised 18 percent of advertising on the Internet, while financial services, media and pharmaceuticals and healthcare made up 17 percent, 10 percent and 5 percent, respectively.

The CPM pricing model as a percentage of the total mix remained constant, comprising 44 percent of all deal revenues in the second quarter. Performance deals accounted for 39 percent of all deals made in the second quarter, up from 35 percent in Q2 2003. Hybrid deals, a combination of CPM and performance, declined from 20 percent in Q2 2003 to 17 percent in Q2 2004.