Online Ad Revenues Tick Upward, Despite Overall Economy

by , May 16, 2008, 7:30 AM
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headshot of Randall RothenbergDespite continued fears over a troubled economy, U.S. online ad revenues continued their upward climb in the fourth quarter of 2007, according to new data from the Interactive Advertising Bureau and PricewaterhouseCoopers LLP.

Web advertising revenue in the quarter hit $5.9 billion, representing "historic revenues" for a single quarter, and a 24% increase over the same period in 2006, according to Randall Rothenberg, president and CEO of the IAB.

"It's a very exciting time," Rothenberg said. "Explosive innovation in the industry is providing marketers with new and unique ways to reach consumers."

As a result, this last period marked the fourth consecutive year, and the 13th consecutive quarter of record results. For the full year 2007, revenues totaled $21.2 billion--exceeding 2006 performance by 26%, itself the former record year.

"Despite the current state of economic uncertainty, 2007 was another record year and the 13th consecutive record quarter," said David Silverman, partner, Assurance, PricewaterhouseCoopers.

Search, display, classifieds and lead generation all continued to grow at a steady rate, according to the report. Consumer advertisers remained the largest category of Internet advertising spending, at 55% of 2007 full-year revenues--up from 52% from all of 2006.

Online advertising continues to remain concentrated, with the 10 leading ad-selling companies accounting for 69% of total revenues in the fourth quarter of 2007, consistent with the 69% reported for the fourth quarter of 2006.

Companies ranked 11th to 25th accounted for 11% of revenues for the fourth quarter of 2007, while companies ranked 26th to 50th accounted for 9% in the fourth quarter of 2007.

Search revenues account for 42% of 2007 fourth-quarter revenues, up from the 41% reported for the same period in 2006. Search advertising revenues totaled $2.5 billion in the fourth quarter of 2007--up 27% from the fourth quarter of 2006, when search revenues totaled $2 billion.

Meanwhile, display-related ad revenues totaled $2.1 billion, or 35% of total revenues, during the fourth quarter of 2007--up 32% from the $1.6 billion reported in the fourth quarter of 2006.

Classifieds revenues accounted for 14% of 2007 fourth-quarter revenues or $832 million, down slightly from the 16%--$765 million--reported in the fourth quarter of 2006.

Lead-generation revenues accounted for 7% of the 2007 fourth-quarter revenues or $416 million, down from the 8%-or $383 million--reported in the fourth quarter of 2006.

Consumer advertisers continue to represent the largest category of Internet ad spending, accounting for 55% of 2007 fourth-quarter revenues or $3.3 billion, consistent with the 55% reported for the same period in 2006.

Financial Services advertisers represented the second-largest category of spending at 15% of 2007 fourth-quarter revenues or $892 million, compared to the 15%--or $718 million--reported in the same period in 2006.

Computing advertisers represented the third-largest category of spending at 11% of 2007 fourth-quarter revenues or $654 million, up slightly from the 10% reported for the fourth quarter of 2006.

Telecom companies accounted for 8% of 2007 fourth-quarter revenues or $476 million, compared with the 8% reported in the same period in 2006, while Media accounted for 6% of 2007 fourth-quarter revenues or $357 million--consistent with the 6% reported for fourth-quarter 2006.

The consumer-related categories are retail at 49% of 2007 fourth-quarter consumer ad revenues, followed by automotive at 22%, leisure (travel, hotel and hospitality) at 13%, packaged goods at 8%, and entertainment (music, film & TV entertainment) at 7%.

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