Online Ad Revenue Hits $26 Billion In 2010

OnlineAd-Spending

After a down year in 2009, U.S. online ad spending rebounded in 2010, growing 15% to $26 billion, according to full-year data released Wednesday by the Interactive Advertising Bureau and PricewaterhouseCoopers. Online ad revenue in the fourth quarter hit a record $7.4 billion, up from $6.4 billion in the prior quarter. For the first time, IAB also issued an annual figure for mobile ad spending, estimated at $550 million to $650 million in 2010 (separate from the online total).

The double-digit growth in overall Internet ad spending marks a turnaround from 2009, when the total dipped 3.4% to $22.7 billion, due to a stagnant economy. But an ad revival that began in the fourth quarter of 2009 carried through into 2010. "We have now had five consecutive quarters of growth, so it appears we have definitely weathered the storm. At least for the Internet advertising economy, the recession appears to be behind us," said Sherrill Mane, senior vice president of industry services at the IAB, during a conference call announcing the year-end numbers.

The resurgence in display advertising highlighted the broader online ad recovery. After spending in the category increased just 4% in 2009, it jumped 24% in 2010 to $9.9 billion, accounting for 38% of total revenues. Within display, sponsorships saw the steepest growth -- rising 88%, followed by digital video (up 40%), and banners (23%). Rich media was essentially flat year-over-year.

Digital video spending is expected to continue climbing this year, with an IAB study this month showing that marketers and agencies plan to increase spending 22% in the segment in the next 12 months.

Search grew only half as fast as display, at 12%, but remains the largest online ad format, making up 46% of 2010 revenues. Search revenues totaled $12.0 billion in 2010. Classified -- like display -- enjoyed a significant rebound in spending last year, growing 15% to $2.6 billion after declining 29% in 2009. The category accounted for 10% of overall online ad revenues. Email, however, plummeted 33% in 2010 to $195 million, while lead-generation fell 8% to $1.5 billion.

Going by industry category, retail continued to represent the largest chunk of Internet ad spending, accounting for 21% of last year's total, or $5.5 billion -- up from $4.5 billion in 2009. Rounding out the top five were telecom (13%), financial services (12%), automotive (11%), and technology (8%).

Despite industry efforts to reduce reliance on the click-through, the shift toward performance-based advertising that began in 2006 continued through last year. Nearly two-thirds (62%) of 2010 revenues were priced on a performance basis, compared to 33% on a CPM model. Hybrid pricing accounted for the remaining 5%.

The IAB report indicated that the 15% growth in Internet spending outstripped other media segments last year including cable TV (14%), network TV (6%), Spot TV (3.4%), national magazines (4%) and local newspapers (down 2%).

"Consumers have shifted more of their time to digital media -- watching television shows and movies online -- and advertisers now accept this multifaceted medium as a key component for reaching their targets," stated IAB President and CEO Randall Rothenberg. However, brand advertising in TV remains largely unaffected by increased online spending. The TV upfront this year is expected to hit $10 billion, with double-digit percentage gains for broadcast and cable.

 

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