Q3 Web Ad Spending Slows

NEW YORK The Interactive Advertising Bureau said Internet ad spending continues to expand, though at a slower rate than in the past two years.

The industry group estimated that Q3 Web ad expenditures reached $4.2 billion, up 33 percent from a year earlier. This marks the highest quarterly spending level the IAB has recorded.

Spending was up just 2 percent from the second quarter, however, the lowest sequential growth the IAB has reported since the third quarter of 2004, when expenditures dipped 2 percent. Last quarter, the IAB said Web spending was up 5 percent sequentially and 35 percent year over year.

Q3 is seasonally the lowest spending quarter, since it encompasses the summer months of July and August, when all facets of business slow down.

“We’re getting used to seeing all big numbers,” said Sheryl Draizen, svp and general manager at the IAB. “I think 33 percent is a nice jump.”

She pointed out that interactive ad spending reached $12.1 billion in the first nine months of the year, nearly equal to the $12.5 billion for all of 2005.

The IAB report highlights the outsized influence Google has gained in Web advertising. In Q3, it reported $2.7 billion in revenue, giving it control of 64 percent of all Web ad spending. (Google paid out 31 percent to sites in its publisher network, including small venues and large search partners like AOL.) Google’s 10 percent sequential revenue growth dwarfs the overall industry expansion.

While search and banner ads make up over 60 percent of Internet ad spending, video placements are a small but growing force. An American Advertising Federation survey found 43 percent of marketing executives believe more than 20 percent of budgets now allotted to broadcast TV will be diverted to online video by 2010.

Draizen said the IAB would begin to break out spending for online video, even though, “I don’t think you’re seeing the promise of digital video, the exploding potential of it, realized yet.”

The IAB reports industry estimates for the first and third quarters, and full spending breakdowns twice a year.