IQ News: Online Ad Growth Slows, According to IAB Report

The latest report on Internet ad spending from Coopers & Lybrand and the Internet Advertising Bureau shows the industry’s first significant slowdown: a mere 6 percent increase in spending by advertisers in the third quarter over the second quarter this year. While previous quarters had seen increases in the high double digits to even triple digits, spending in the third quarter reached only $227.1 million, just barely surpassing the second quarter’s $214.4 million in online ad revenue.
Furthermore, the figure indicates that the year’s total will likely fall short of some industry predictions. Jupiter Communications, for instance, predicted that 1997 online spending would reach $940 million. Year-to-date spending is $571 million.
“We’re seeing a seasonality consistent with traditional media,” said IAB chairman Rich LeFurgy, vice president of ESPN Internet Ventures and ABC News. Typically, the months of July, August and September are the weakest ad revenue months across all major media. The IAB is optimistic that the fourth quarter will be the biggest ever for online ad spending.
Though the trend toward robustly increased spending is slowing down, in the past, growth has been impressive: Revenues reported by publishers in the third quarter of 1996 were just $75.6 million, making this year’s quarterly figure slightly more than triple what it was a year ago.
As part of the survey, which is conducted by anonymously querying online publishers about their ad revenue, each company was asked to predict future growth. Three-quarters of those who participated expected the market to increase, while fewer than 10 percent anticipated a slow-down.
One encouraging sign is the continued increase in online spending by consumer goods advertisers. Those marketers now account for more spending than any other category, totaling 32 percent of the third quarter figure. Technology advertisers rank second, followed closely by financial services at 22 percent and 20 percent, respectively.
A new element of the Coopers/IAB survey breaks out ad revenue by particular segments within the industry. Search engines accounted for some 55 percent of ad revenue, trailed by technology publishers’ 21 percent and news and information sites’ 8 percent. Sports sites brought in 5 percent of the total, while entertainment publishers garnered 3 percent.
Separately, the IAB last week also identified standards for the “next generation” of online advertising forms. Such creative wouldn’t be limited to banners, said LeFurgy.