Paid search listings powered a 21 percent increase in Internet advertising spending in 2003, according to figures compiled by the Interactive Advertising Bureau.
The IAB's annual ad revenue report, compiled by PricewaterhouseCoopers, found that a 182 percent rise in annual search advertising spending helped the Internet ad industry reach $7.3 billion. Search accounted for 35 percent of Web ad revenue in 2003, up from 15 percent in 2002.
Search continued to gain momentum through the year. In the fourth quarter, it accounted for 40 percent of the Internet ad industry's $2.2 billion in sales.
Despite the gains, the IAB estimates that the Internet ad industry greatly trails other ad vehicles, accounting for about 3 percent of overall U.S. ad spending in 2003. This marked a 1 percentage-point market share gain from a year earlier.
The strength of search was evidenced in the continued shift in pricing models. CPM or impression-based deals remained the most popular pricing method, accounting for 43 percent of revenue, but performance-based deals rose to 37 percent. In 2002, CPM deals were 45 percent of revenue compared with 21 percent for performance based. The growth came at the expense of hybrid pricing deals, according to the IAB.
Rich media spending climbed from $300 million to $422 million. Classifieds increased 37 percent to $1.2 billion.
Other Internet ad areas did not fare as well. The IAB said that spending on banner ads declined 12 percent to $1.5 billion. Display advertising still accounted for 21 percent of ad spending. With spam worries holding back the industry, the IAB said, e-mail revenue declined from $240 million in 2002 to $218 million in 2003. The report also tracked declines for slotting fees and interstitials. The IAB ad spending reports mix ad formats with purchasing methods.