Internet ad revenue jumps 35 percent to $16.9B in '06: IAB

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A new report claimed Internet advertising revenue jumped 35 percent last year to $16.9 billion, signifying a growing recognition by advertisers of the online channel's potential to influence shopping and buying decisions.

The findings, from PricewaterhouseCoopers LLP's new media group for the Interactive Advertising Bureau, also showed that fourth-quarter 2006 Internet ad revenue was up 35 percent to $4.8 billion from the year-ago period.

"I think that basically what we're starting to see is that marketers are experiencing first-hand how this medium enhances their ability to target and engage the audience like no other," said Sheryl Draizen, senior vice president and general manager at the IAB, New York.

The Interactive Advertising Revenue Report said that search marketing, display advertising, classifieds and lead generation continue to grow at a healthy rate with a jump in performance- and impression-based selling.

Keyword search, at $5.37 billion, accounted for 40 percent of online ad spending last year versus $5.14 billion and a 41 percent share in 2005. Display advertising was $3.69 billion last year, with a 22 percent share as compared to $2.5 billion and a 20 percent slice in 2005. See the full chart here.

Spending on online classifieds accounted for $3.06 billion and an 18 percent share last year, from $2.13 billion and a 17 percent share. Lead generation was the next big item, at $1.31 billion and an 8 percent slice last year versus $753 million and a 6 percent share.

Rich media ads including broadband took in $1.19 billion and a 7 percent share in 2006, from $1 billion and an 8 percent slice in 2005.

Sponsorship registered a drop, with $496 million and a 3 percent share last year versus $627 million and a 5 percent share.

Slotting fees, or the premiums paid a site's publisher for a top spot, completely vanished from this year's IAB report, although it accounted for $125 million and a 1 percent market share in 2005.

Spending on e-mail again was low -- $338 million and a 2 percent share of all online ad revenue last year, albeit an increase from $251 million and a 2 percent share in 2005.

"CAN-SPAM obviously had a big impact on e-mail and so I think marketers can continue to leverage e-mail because it is an effective tool," Ms. Draizen said.

The report is available at http://www.iab.net/resources/ad_revenue.asp.

This shift to online advertising is good news not just for large publishers' sites. The report found that the top 10 sites last year accounted for 69 percent, or $11.65 billion, in online ad spending, from 72 percent share and $9.03 billion in 2005.

"We're starting to see that revenues are spreading across a little more," Ms. Draizen said. "So that means that some of the smaller sites are starting to see increased revenue."

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