IAB: 3Q Online Ad Spending Tops $1B

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Online ad spending for the third quarter of 1999 was $1.217 billion, crossing the $1 billion mark for the first time in a quarter, according to a report released last week by the trade group Internet Advertising Bureau.

Also, online ad spending for all of 1999 will probably hit $4.4 billion once the fourth- quarter numbers are in, the report conducted by consulting firm PricewaterhouseCoopers projected. "If momentum increases into fourth quarter, we could see a number even higher," said Rich LeFurgy, IAB chairman.

Among the report's other findings:

• Third-quarter 1999 ad spending was 148 percent higher than the third quarter a year ago and $283 million over the second quarter of 1999.

• Year-to-date online ad spending through the third quarter of 1999 was $2.8 billion, 125 percent over the first three quarters of 1998.

• Cash-based deals accounted for 94 percent of transactions while barter accounted for 5 percent and package deals accounted for 1 percent.

"We continue to see cash the driving force of how commerce between buyers and sellers is working, where barter is not a significant aspect of the marketplace," said LeFurgy. "There's been a lot of discussion about barter, [but] what we tend to believe is that ... it's the second- and third-tier players who are making the most noise."

The top 10 online media companies accounted for 72 percent of online ad dollars, up from 70 percent during the third quarter a year ago. The top 25 media companies accounted for 84 percent of online ad dollars, and the top 50 accounted for 87 percent.

Among online ad spending categories, consumer advertising was No. 1, accounting for 32 percent of spending overall. Within that category, retail accounted for 48 percent of spending; automotive accounted for 19 percent; travel was 8 percent; and toys and amusement were 4 percent each.

Among the other overall category leaders, computing was second at 21 percent. Financial services accounted for 19 percent. Telecommunications accounted for 6 percent.

Banner ads are still the dominant form of online advertising making up 55 percent of e-marketers' ad buys.

"The banner is far from dead," said LeFurgy. "It's the bedrock of Internet advertising."

Meanwhile, sponsorships accounted for 27 percent of online advertising. Interstitials accounted for 4 percent. E-mail doubled its presence over the third quarter of last year, from 1 percent to 2 percent.

As for pricing, combination performance/cost-per-thousand impression deals were the dominant model, making up 55 percent of the deals, while straight CPM deals were 37 percent and straight performance-based deals were 8 percent.

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