• The New York Times, Tuesday, December 26, 2006 3:03 PM

The cost of buying ads on the Internet is going up, and it's going to continue. The Web has proven to be the cheapest, most effective means of reaching a targeted audience. As such, more advertisers are shifting dollars to the Web, which places the supply of quality Web sites and ad networks at more of a premium.

The question for 2007 is just how much publishers will raise their ad rates. To a certain extent, publishers are wondering that too, especially as they scramble to keep up with their competitors. Joanne Bradford, MSN's corporate vice president, notes that during the last two years, "There's been unbelievable price pressure." Some popular MSN pages have increased as much as 10-fold, she said.

Even the Interactive Advertising Bureau, which is supposed to offer standards and guidelines for things like pricing and ad unit sizes, says there aren't any reliable statistics on average ad rates, partly because ad agencies often negotiate special rates with publishers, which they keep to themselves.

Right now, it's all good for the business, as online advertising is expected to reach $16.4 billion this year, according to eMarketer, up 31% from 2005. But if the overall economy slows--as some economists project--and rates keep going up, national advertisers may scale back their budgets, Internet ad growth could slow considerably. Indeed, eMarketer thinks Web growth will slow to 19% this year, reaching $19.5 billion.

Read the whole story at The New York Times »