WWJ Newsradio 950 - Upward Trend in Web Advertising Still Strong; Record of $21.2 Billion Spent In 2007

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Upward Trend in Web Advertising Still Strong; Record of $21.2 Billion Spent In 2007

New data from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers LLP (PWC) show that Internet advertising in the U.S. is still growing at an astounding rate.

The IAB/PWC Internet Advertising Revenue Report shows that in 2007, Internet ad revenues reached a record $21.2 billion, up 26 percent from 2006. That means, the IAB says, that Internet advertising revenues surpassed radio advertising and cable television advertising in total U.S. ad spending.

David Doty, senior vice president of thought leadership and marketing for the IAB, said that growth continues, in part, because more companies that might have been reluctant to advertise on the Web in the past are jumping in.

"As more companies discover the fact that Internet advertising is both accountable and effective," Doty said, "more companies are using it."

Also changing, he said, is the way advertisers are using the Internet. Doty said digital video, for example, has emerged "as a major component" of Web advertising. That's because, as technology advances and the availability of broadband access expands, consumers have come to expect video to be part of the online experience.

Looking forward, Doty said, the IAB sees advertisers making greater use of social networking to connect themselves to consumers – and consumers with each other. He said the group has seen an increased interest among companies to “host a conversation” about the products and services in their categories, instead of just directly selling to consumers.

"Advertising used to be about interruption," Doty said. Now, it’s becoming more and more about connecting people and staying out of the way,

Consumer Products Dominate

As in past years, consumer-related advertising accounted, by a long shot, largest category of Web ad revenues. It comprised 55 percent of 2007 revenue, up from 52 percent from the full year 2006. Financial services, the second-largest category, accounted for 15 percent, followed by computing advertisers at 11 percent.

Within the Consumer category the biggest sub-categories are retail (47 percent), automotive (21 percent), leisure (13 percent), entertainment (9 percent) and packaged goods (8 percent).

Other key trends outlined in the report include:

Online advertising continues to remain concentrated, with the ten leading ad-selling companies accounting for 69 percent of total revenues in the fourth quarter of 2007, consistent with the 69 percent reported for the fourth quarter of 2006.
Search remains the largest revenue format, accounting for 41 percent in 2007, up from 40 percent reported in 2006. Search advertising revenues total $8.8 billion, up 30 percent from the $6.8 billion reported in 2006.
Display-related advertising totaled $7.1 billion, or 34 percent of 2007 revenues compared to $5.4 billion (32 percent of total reported in 2006.
Classifieds revenues accounted for 16 percent of 2007 revenues or $3.3 billion, down slightly from the 18 percent ($3.1 billion) reported for 2006.
Lead generation revenues (fees advertisers pay to Internet advertising companies that refer qualified purchase inquiries) accounted for 7 percent of 2007 revenues or $1.6 billion, down from the 8 percent or $1.3 billion reported in 2006.

For a copy of the complete report (20 pages, PDF format), click here.

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