IAB Reports Online Advertising Softens in Third Quarter 2000

Internet Advertising revenues for the third quarter of 2000 increased 63% over the comparative quarter for 1999, and showed a slight decline of six and a half percent when compared to the second quarter of 2000, according to the Internet Advertising Bureau's (IAB) Internet Ad Revenue Report which is conducted independently by the New Media Group of PricewaterhouseCoopers.

Third quarter 2000 revenues grew $ 1,986 million (63.2%) over the same period in 1999, and showed a decline of $ 138 million (6.5%) when compared to the second quarter of 2000. Year-to-date online advertising revenues for 2000 now stand at $6.1 billion with a continuing run rate of between $8 and $9 billion for the year.

"This slight decline in online ad revenue should come as no surprise to the industry. The slowdown which we are seeing this quarter has its roots in a number of factors which affect the medium. The pull-back of advertising by many companies in the dot.com sector, combined with the traditionally weak third quarter, and the transition of the advertisers' focus on how to best take advantage of the Internet, all have contributed to the third quarter slowdown,: said Rich LeFurgy, Chairman of the IAB and General Partner of WaldenVC.

"There is no doubt that traditional advertisers are increasing their online spending, as the $6 billion year-to-date attests. With publishers offering a variety of new and innovative ad formats these advertisers are now transitioning their objectives. Increasingly aware of the power of the medium for branding and direct marketing, these savvy advertisers are no longer looking for the most traffic, rather, they are seeking different ways and new creative formats which publishers are offering, to build their brands. This is an industry of innovation, and the serious players are in it for the long haul."

Commenting on the report, Tom Hyland, Chair, PricewaterhouseCoopers New Media Group noted: "Because of the robust nature of this medium, we have become accustomed to continued, unfettered growth. We believe that it is important to note that in a comparatively weaker advertising market, Internet ad revenues still totaled nearly $2 billion for the quarter. This is still the fastest growing medium ever, subject to the vagaries of the marketplace, but still recognized by advertisers, both small and large, as the place they have to be to insure success."

The categories which lead online spending during the third quarter were: Consumer-related (30%), Computing (18%), Financial Services (14%), Business Services (10%), and Media (11%). The report also found that the vast majority of revenue transactions, (92%) continue to be cash-based with barter/trade and packaged deals accounting for 7% and 1% of total revenues respectively.

Innovation in Internet advertising formats and models has seen some changes in the overall share, notably banners, while still the predominate format, account for 46% of the third quarter's online