IAB: Online Ads Soar 35% in 2006, To $16.9 Billion

by Gavin O'Malley, May 24, 2007, 6:00 AM

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Branded display ads and search placements helped the online ad industry post its best year ever in 2006, according to numbers released Wednesday by the Internet Advertising Bureau and PricewaterhouseCoopers. Overall, revenue increased 35% last year to $16.9 billion--due in large part to record fourth-quarter revenue of $4.8 billion.

Both search revenue and display revenue climbed 31% year-over-year, to $6.8 billion and $5.4 billion, respectively. Search accounted for 40% of last year's revenues, slightly lower than the 41% it commanded in 2005. Display advertising, classifieds and referrals accounted for 32%, 18% and 8% of last year's full revenues, respectively.

"The ability for these marketers to achieve both performance-based and branding objectives with interactive advertising is the foundation for this exceptional growth," explained David Silverman, partner, Assurance, PricewaterhouseCoopers.

Consumer-related advertisers accounted for the largest revenue category at 52%--up from 51% in 2005. Financial services, the second-largest category, accounted for 16%, followed by computing advertisers with a 10% share.

Within the consumer category, the biggest sub-categories were retail, with a 47% share; automotive with 22%; and leisure with 13%. The industry remained highly concentrated among the top 10 sellers, which accounted for 69% of revenue last year. Still, this was less than the 72% that top sellers controlled in 2005.

The IAB expects last year's growth to continue apace, according to Randall Rothenberg, president and CEO of the bureau. "We have every confidence that this growth trend will continue as marketers allocate more of their total marketing dollars to interactive and the industry delivers effective and innovative platforms for connecting with consumers," Rothenberg said Wednesday.

Search, display, classifieds and lead-generation all will continue to grow at a healthy rate, with an increase in both performance-based and CPM, or impression-based pricing, the IAB said. In addition, consumer advertisers will continue to represent the largest category of Internet ad spending.

ADVERTISING FORMATS	2006 (Ttl =$16,879)		2005 (Ttl = $12,542M)
Type of Advertising	$	% share of market	$	% share of market
Display Advertising	3,685	22%	2,508	20%
Sponsorship	496	3%	627	5%
Slotting Fees	0	0%	125	1%
Rich Media (including Broadband Video)	1,192	7%	1,004	8%
All Display	5,373	32%	4,264	34%
Keyword Search	6,799	40%	5,142	41%
Classifieds	3,059	18%	2,132	17%
E-mail	338	2%	251	2%
Lead Generation*	1,310	8%	753	6%
TOTALS:	16,879	100%	12,542	100%

INDUSTRY CONCENTRATION
	FY 2006		FY 2005
Top 10	69% ($11,647)		72% ($9,030)
Top 25	82% ($13,841)		86% ($10,786)
Top 50	92% ($15,529)		95% ($11,915)

PRICING MODELS
	FY 2006	FY 2005
CPM or Impression	48% ($8,102)	46% ($5,769)
Performance Deals	47% ($7,933)	41% ($5,142)
Hybrid	5% ($844)	13% ($1,630)

Source: PricewaterhouseCoopers/Interactive Advertising Bureau

Get the full report here.

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