Online Advertising Hits $5.8B for First Half of 2005NEW YORK -- Online advertising revenue for the first six months of 2005 touched $5.8 billion, setting a record and resulting in a 26 percent jump over the same period in 2004.
Second-quarter 2005 online ad revenue also rose 26 percent compared with the year-ago period, totaling $2.985 billion. The second-quarter online ad revenue was 6.6 percent higher than the first quarter.
"The biggest opportunity for marketers in using the online medium is because it stretches the dollar more than other media and it gives them an opportunity to get a leg up right now," said Greg Stuart, president/CEO of the Interactive Advertising Bureau, New York.
The estimates were released yesterday at the IAB's MIXX Conference and Expo in New York with help from consultancy PricewaterhouseCoopers' new media group.
As expected, search accounted for 40 percent of online ad revenue, or $2.315 billion, in the first half of 2005. The tactic similarly accounted for 40 percent of revenue, or $1.817 billion, in the first half of 2004. Search budgets rose 27 percent this first half versus last year's.
Display ads, at 20 percent, garnered the next biggest chunk of online budgets. Marketers spent $1.157 billion in the first half of 2005 versus $942 million in the year-ago period and a 20 percent market share.
Classifieds gained a point this year, claiming an 18 percent share and $1.041 billion versus 17 percent and $782 million in the first half of 2004.
Rich media ads, at $463 million, took 8 percent of online ad revenue. It maintained its 8 percent market share from last year's first half, albeit the ad spend was up 26 percent from $368 million.
The referrals category was renamed this year to include lead generation. It accounted for 6 percent, or $347 million, of online ad revenue, up from a 2 percent share and $114 million in spending in the first six months of 2004.
Sponsorships were down in market share and spend. Budgets fell to 5 percent in the first half, to $317 million. Marketers in the first half of 2004 allocated 9 percent, or $414 million, for sponsorships.
While e-mail budgets were up more than 60 percent this first half versus last year, the figures were a pittance when contrasted with other online formats: $116 million and a 2 percent market share. Last year, e-mail accounted for a 2 percent share and $70 million in online ad revenue.
Finally, slotting fees posted a 50 percent drop in market share, albeit its 1 percent slice accounted for $58 million of online ad revenue in the first half of 2005. Last year, slotting fees accounted for a 2 percent share and $92 million in revenue.
The Advertising Revenue Report, as the IAB-PricewaterhouseCoopers effort is called, also commented on pricing models.
Cost-per-thousand (CPM) or impression-based deals accounted for a 48 percent market share and $2.75 billion in online ad revenue in the first six months of this year. This is up from a 45 percent share and $2.068 billion in the year-ago period.
Performance deals were up sharply, rising from $1.749 million in the first half of 2004 to $2.315 billion in the first half of this year. Market share, too, was up from 38 percent in 2004 to 40 percent this year.
But hybrid deals lost ground as buyers and sellers opted for CPM and performance options. Market share fell to 12 percent in the first half of 2005 versus 17 percent in the year-ago period. Revenue dropped from $782 million in first-half 2004 to $722 million in the first six months this year.
That said, there is no shortage of online ad vehicles with ROI potential: search marketing, lead generation, video and e-mail, for example. The plethora of options may confuse, however.
"The challenge is that you've got so many opportunities that it's been hard for marketers to get their hands around it," Stuart said.
But the road ahead is clear for some marketers. Ford Motor Co., for instance, late this summer said it would spend 15 percent of its $1 billion budget online. And PepsiCo, a champion of interactive marketing, allocates nearly 10 percent of its ad spend to the online medium.
"I think at this point every marketer knows they need to do something, and what you have within that is a small group of marketers, what I call the breakaway group," Stuart said.