State of the Union
The latest figures released this past Monday by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) underline the growing trend of marketers spending more of their total advertising budgets online. Online advertising revenues for the first half of 2005 soared to $5.8 billion, which equates to a 26% increase from the same period in 2004. Revenue for the second quarter of 2005 amounted to $2.985 billion, which represents a parallel 26% improvement over the second quarter of last year, as well as an increase of 6.6% over the first three months of the year.
Keyword-based search and display ads represented the lion’s share of online ad spending, accounting for 40% and 20% of total spending, respectively. While the percentage spent in search remained unchanged from figures corresponding to the first half of 2004, the amount of revenue accounted by this same portion jumped to $2.3 billion from $1.8 billion. Correspondingly, the percentage spent on display ads remained intact from last year’s figure, yet earnings increased to $1.15 billion from $0.94 billion.
Classifieds and rich media ads posted year-over-year increases, with rich media growing approximately 26% to $463 million and classifieds jumping an estimated 33% to just over $1 billion. Two categories in contrast, online sponsorships and slotting fees, posted year-over-year losses. Online sponsorships in the first six months of this year fell 23% to $317 million, dropping to 5% of the total online advertising pie from 9% in the first half of 2004. In that same time period, slotting fees plunged 37% to $58 million.
As a whole, for the first half of this year, pricing models and impression-based pricing increased in popularity to 48%, up 3% from the same period last year. While performance-based deals increased 2% to 40%, hybrid deals declined from 17% to 12%. Referrals and lead generation spending stands out for achieving the highest growth in the first six months of this year over last year’s first half, surging approximately 204% to $347 million. The burgeoning category still accounts for only 6 percent of total Internet-based advertising.
Before you quit your day job to start your own small Internet start-up to bank off of the growing trend in online ad spending, realize that about 74% of total online ad revenue is controlled by the top 10 websites (Google, MSN, and Yahoo). Furthermore, to keep things in perspective, online advertising still remains a relatively small portion of the total U.S. advertising market, which during the first half of 2005, stood at approximately $71-billion, according to research firm TNS Media Intelligence.
Nonetheless, as more and more consumers are finding themselves online rather than offline, the advertising dollar is sure to follow close behind. Several more established players have already begun positioning themselves to take full advantage this trend. CNNMoney, for example, will consolidate four financial magazines online under its banner as it seeks to increase the viewership of its Web display advertising. Microsoft recently announced the launch of its first venture into paid search ads, preparing to go head-to-head with the more established paid search businesses of Google and Yahoo/Overture. The service, known as adCentre, launched in Singapore on August 31st and launched in France this past Monday. The U.S. version of the service is due to begin testing in October.
Sources:
http://www.out-law.com/default.aspx?page=6161
http://www.999today.com/computersandinternet/
news/story/1975.html
http://www.brandweek.com/bw/news/recent_
display.jsp?vnu_content_id=1001181560
http://www.globetechnology.com/servlet/story/
RTGAM.20050927.gtadsep27/BNStory/Technology/
