Online Ad Revenue Continues Rebound

NEW YORK Internet advertising revenue notched its third consecutive quarter of growth in Q2, rising nearly 14 percent from the year-ago period and 2 percent from Q1 to $1.66 billion, according to a report released today.

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

For the first half, Internet ad revenue totaled $3.29 billion, a 10.5 percent boost over the first six months of 2002, according the report. Earlier this year, TNS Media Intelligence/CMR reported that Internet ad revenue was $3.2 billion for the first half, up 15.3 percent from the same time in 2002 [IQ Daily Briefing, Sept. 2].

“With Internet usage and broadband adoption continuing to escalate, marketers are throwing their weight and dollars behind interactive advertising,” said IAB president and CEO Greg Stuart.

Other factors contributing to the sector’s rebound include increased buy-side demand, firming prices, an improved selling process, more performance deals, fewer non-cash deals and continued investment from consumer advertisers, according to Pete Petrusky, director of new media at PwC.

Keyword search advertising continued its meteoric rise. This form of advertising, in which companies pay for a favorable spot or more frequency in search-result listings, represented 31 percent of total ad revenues for the second quarter, more than tripling its stake over the year-ago quarter.

Rich media doubled its share, increasing from 3 percent in Q2 2002 to 6 percent in Q2 2003. The growth possibly reflects advertisers’ recognition of faster broadband adoption, according to the report, which in turn offers more opportunities for ads that deliver sound and full-motion video.

Keyword search and rich media advertising continued to take share away from display ads and sponsorships, which at one time dominated the landscape. Display advertising, or banners, accounted for 22 percent of Internet ad revenue in the second quarter and sponsorships represented 11 percent, down from 32 percent and 24 percent in Q2 2002, respectively.

Classified advertising grew slightly from 15 percent to 18 percent, while e-mail marketing and interstitials held steady, bringing in 4 percent and 3 percent of ad revenue on the Web in the second quarter, respectively.

Meanwhile, keyword search as an ad format represented 15 percent of online ad revenue in 2002, more than tripling its stake over 2001. Classifieds held steady, bringing in 15 percent of ad revenue on the Web in 2002.

The study also found that consumer goods advertisers continued to spend the most dollars online, representing 35 percent of all Web advertising. The computing category comprised 20 percent of advertising on the Internet, while financial services, media and business services made up 13 percent, 12 percent and 10 percent, respectively.

The rise in search advertising caused a ripple effect in pricing models, the study said, capturing 35 percent of second-quarter revenue, up from 15 percent in the same period a year ago. Hybrid deals, a combination of CPM and performance, declined from 39 percent in Q2 2002 to 20 percent in Q2 2003. And the CPM pricing model remained relatively unchanged, comprising 45 percent of all deal revenues in the second quarter.