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Internet Advertising Reaches $8.2B in 2000

Internet advertising in the U.S. reached $8.2 billion in 2000, rising to $2.2 billion in the fourth quarter alone. According to the latest study by the Interactive Advertising Bureau, even though ad spending rose 78 percent in 2000 from the previous year, the increase is “markedly lower” than historical levels.

“The turbulence that has affected all advertising sectors in the past six months has also quite naturally impacted the Internet,” said Robin Webster, president/CEO of the IAB. “While we have continued to grow as an industry, that growth has been tempered by the times and I would expect that we will see this reflected in future reports.”

The IAB report, conducted with the help of the New Media Unit of PricewaterhouseCoopers, noted that revenue from banner ads continued to decrease in the fourth quarter of 2000, accounting for 40 percent of the quarter’s online ad revenue. That figure is down from 46 percent of all revenue in the third quarter and 47 percent for the year. Sponsorships accounted for 31 percent of all revenue in the quarter and 28 percent for 2000. Classifieds accounted for 10 percent of all advertising in the quarter and 7 percent for the year. Referrals were responsible for 5 percent of all ads in the fourth quarter and 4 percent for the year. Interstitials accounted for 5 percent of all online advertising in the fourth quarter and for 4 percent for the year. E-mail was responsible for 4 percent of the fourth quarter’s revenue and 3 percent for the year. Rich media accounted for 2 percent in the fourth quarter and 2 percent for the year, and keyword searches were 2 percent in the fourth quarter and 1 percent for the year.

According to Rich LeFurgy, chairman of the IAB, Internet advertising ad spending over the past five years has reached $15.9 billion. He noted that this represents 75 percent to 80 percent of revenue generated by the cable television industry in the same period.

In contrast, Universal McCann, the media buying unit of Interpublic Group, estimates that the combined revenue of broadcast and cable television in 2001 will be about $58.8 billion.

However, Merrill Lynch recently forecast that online ad spending will decline by 25 percent this year to about $6 billion.

The IAB, which recently changed its name from the Internet Advertising Bureau to more accurately reflect its growing membership in interactive media, did not want to commit itself to long range forecasts. However, LeFurgy did say that there is some anecdotal evidence that things are looking up for the industry.

“Significant revenue is being generated,” he said. “In 2001 we have a much better base without some of the dot-com business factored in. People are feeling the demand is beginning to uptick. We think we’re looking at a good year coming up.”

He also noted that overall cost-per-thousand rates are beginning to stabilize because of the continued consolidation in the industry. Advertisers and publishers are stretching their ad dollars to incorporate more innovative forms of advertising like e-mail and rich media.

“The big companies are getting bigger,” LeFurgy said. “They are not just relying on banners or sponsorships.”

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