• by Joe Mandese  @mp_joemandese, November 11, 2003

If there was any doubt that search engine marketing has become the hottest aspect of the online advertising marketplace, it should be put to rest by today's release of the latest edition of the Interactive Advertising Bureau's and PricewaterhouseCoopers' Internet Ad Revenue Report. The study shows keyword search accounted for nearly a third (31%) of all online advertising activity, making it the dominant form of Internet advertising during the second quarter of 2003. That's more than three times the share of online ad spending keyword search represented only a year earlier.

Conversely, banners continue to erode as an online ad format, slipping from a dominant 32% of the market in the second quarter of 2002, to just 22% in the second quarter of 2003. And for all the fuss over spam, email marketing remained nascent and flat at 4% of the market.

Rich media, another supposedly hot advertising format, did double in size year-over-year, but still remained relatively small at only 6% of the second quarter 2002 marketplace.

The report also finds Internet advertising continued its recovery during the quarter, rising to $1.66 billion, a 13.9% increase over the second quarter of 2002. That's a significantly higher rate of growth than during the first half of the year, when Internet ad spending totaled $3.39 billion, an increase of 10.5% over the first half of 2002.

                       Q2 '03   Q2 '02 
Display Ads/Banners:      22%      32% 
Sponsorships              11%      24%

Classifieds               18%      15% 
Keyword Search            31%       9% 
Slotting Fees              4%       8% 
Interstitial               3%       3% 
Email
4%       4% 
Rich Media                 6%       3% 
Referral                   1%       2% 

Source: Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers Q2 Internet Ad Revenue Report