• by Masha Geller , June 12, 2003

The totals are in and it looks like 2002 was a good year for online advertising. The Interactive Advertising Bureau and PricewaterhouseCoopers yesterday released the Internet Ad Revenue Report including final figures for fourth quarter and full year 2002, and those figures are quite positive.

According to IAB's tally, 2002 saw an improvement in both year-over-year and quarter-over-quarter revenue results, with online ad revenue in the U.S. totaling $6.0 billion for full-year 2002, down 16% versus 2001.

"A number of factors that had been negatively impacting revenue growth seem to be turning favorable, including a modest rebound in overall advertising spending," said Pete Petrusky, Director of New Media at PricewaterhouseCoopers. "Also, sellers are no longer cycling through lost revenue from the dot com fall-out, and the sharp growth in high-speed Internet access adoption is providing more opportunities for large traditional brand advertisers to experiment with the successful larger and more creative ad formats," he added.

Internet advertising revenue totaled $1.6 billion for the fourth quarter of 2002, up from the previous fourth-quarter estimate of $1.5 billion, and up 9% from the third quarter 2002. The increase in 2002 fourth quarter actual revenues from the previous estimate primarily reflected stronger than expected results from the top ad sellers.

"History shows that advertising ultimately follows the audience, and with 66% of all Americans having regular access to the Internet, we believe advertising budgets will continue to shift more online as long as the online medium continues to gain share of overall media consumption," said Tom Hyland, Chair, PricewaterhouseCoopers New Media Group.

This year's report contains breakouts detailing the performance of particular industry segments. These include:

Ad Formats - Keyword search continued to demonstrate its strength as the lead indicator of growth for the overall interactive ad industry, representing 15% of ad revenues in 2002 - more than tripling its stake over 2001. 4Q 2002 keyword search revenue share was even more prominent, earning 21% of total ad format revenues. Sponsorships and banners were affected by the termination of several long-term deals involving ad sellers, coupled with sharp increases in emerging ad formats. Internet ad revenues broken down by ad formats for 2002 full year revenue are:

                  2001 2002 
Banners          36%  29% 
Sponsorships     26%
18% 
Classifieds      16%  15% 
Keyword Search    4%  15% 
Slotting Fees     8%   8% 

Ad Categories -- In 2002, consumer advertisers continued to spend the most dollars on online advertising (32%). Retail consumer advertisers are the largest segment (42%) in the major consumer category.

                     2001 2002

Consumer            30%  32% 
Computing           18%  18% 
Financial Services  12%  13% 
Media               12%  12% 

Pricing Models -- The CPM pricing model continues to be the predominant choice, comprising 45% of all deal revenues in 2002 (down from 48% last year), while straight performance deals were at 21% (up from 12% last year), and hybrid deals, a combination of CPM and performance declined to 34% (down from 40% last year).