• by Paul Gough , June 29, 2004

Internet advertising will continue its torrid pace over the next five years, more than doubling its market share to a projected $11.4 billion in 2008, according to a new report by PricewaterhouseCoopers LLP.

The findings of the annual report, which were unveiled Tuesday during an entertainment and media conference in New York, painted a generally positive outlook for both industries over the next five years. But the report reserved some of the biggest highlights for the Internet sector, which it said would grow by 16.8 percent between now and 2008.

PricewaterhouseCoopers pegged Internet advertising spending at $6 billion in 2002, $7.2 billion was projected in 2003, and $8.3 billion is forecast for this year. Internet ad spending was down in 2001 and 2002, as the dot-com bubble burst and the media economy faltered.

Online advertising is experiencing a resurgence, said Peter Winkler, managing director of PricewaterhouseCoopers. A lot of that is due to the emergence of paid-search advertising, which doubled in size to $2.1 billion for 2003.

"It's gone from almost nowhere three years ago to be the driver of Internet advertising," Winkler said. Not only is technology allowing search firms to better target advertising, but its importance is showing up in the value that other Internet companies are finding in search firms, such as Yahoo!'s acquisition last year of Overture Services. And only last week, America Online scooped up Advertising.com for $435 million.

Rich media advertising is also growing, from annual revenues of $200 million in 2002 to $600 million in 2003. It's luring major advertisers that are interested in the sight, sound, and motion available in broadband video. Winkler said that Internet advertising has grown from revolution to evolution in its stage of development.

"What we're seeing is that over time, it's smoothing out into nice, solid growth--and yet it's still a new medium," Winkler said. "It's becoming an established part of corporate marketing and advertising. Big advertisers are starting to allocate a significant part of their budgets toward it."

Michael Zimbalist, executive director of the Online Publishers Association, agreed. He said that the broadband Internet is becoming a major opportunity as part of the daypart mix. "The underlying fundamentals look very good for the future," Zimbalist said.