• by May 24, 2004

SAN FRANCISCO - Ad:Tech attendees here woke up to some good news. Online ad revenue has set a new record, as first quarter sales hit $2.3 billion, jumping 38.9 percent over the same period in 2003, according to today's Internet Advertising Revenue Report issued by the Interactive Advertising Bureau and PricewaterhouseCoopers. That's the biggest increase since the pair began monitoring online ad revenues in 1996.

The news seems to confirm the generally upbeat mood here at the Ad:Tech show where attendees are buzzing about broadband streaming video, audience aggregation and strategizing over how the entire interactive sector can shift offline media dollars to the Web. It's a striking contrast from the angst experienced only a year ago when the scent of an uptick was in the air, but momentum remained tepid. It's also different from the hand-wringing associated with the broadcast TV upfronts, the drama to which advertisers remain stubbornly affixed even though they are less satisfied than ever. Advertisers are beginning to balk at the higher prices they will pay for diminished audiences. In Web-land, however, publishers and portals are laying the ground work to educate and evangelize the efficacy of the medium in a post-clickthrough era.

But while the outlook for the overall Internet sector appears positive and some publishers are seeing 50 to 60 percent growth rates in their businesses, there are plenty of issues keeping them up at night.

Stephen Moss, general manager for advertising and sales at MSN, wonders how sustainable online ad sales growth rates are, "How do we maintain the momentum? The level of engagement we have with our customers now is just peaking," and Moss asks, "How do we carve the inventory up to meet the demands of direct marketers and brand advertisers?"

One of the biggest issues facing publishers remains pricing and inventory management. "There's a growing emphasis on optimization and inventory management. And, at what point does a symbiotic relationship become a parasitic one?," asks Lorraine Ross, VP-sales USATODAY.com. Advertisers request frequency capping often but publishers "need to understand their inventory flows better," Ross says.