Search Ads Contribute to Web Spending Rise

NEW YORK The exceptional growth in keyword search advertising helped online ad revenue rise 21 percent to nearly $7.3 billion last year, according to a report released today.

The popular ad format, where companies bid for their text-based ads to appear next to related search results, represented 35 percent of overall Internet ad spending in 2003, up from 15 percent the year before.

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

The increase in keyword search came at the expense of other ad formats, including display ads, sponsorships and interstitials, according to the findings. Display ads, primarily banners, accounted for 21 percent of online ad revenues last year, down from 29 percent in 2002. Sponsorships made up 10 percent of Internet ad spending last year and interstitials, 2 percent, dropping from 18 percent and 5 percent respectively.

Rich media continues to gain acceptance, growing from a 5 percent to 8 percent share of online ad revenue last year. Classified ads, e-mail marketing and referrals stayed fairly steady, accounting for 17 percent, 3 percent and 1 percent of interactive ad spending, respectively.

The CPM pricing model remains the predominant choice among buyers and sellers. Last year, these impression-based ad deals comprised 43 percent of online advertising. Meanwhile, performance-based deals, which are common in the keyword search realm, represented 37 percent, up from 21 percent the year before. As a result, hybrid deals declined from 34 percent in 2002 to 20 percent in ’03.