IAB: First-Half Internet Ad Revenues Of $10B Up 27%

Internet advertising revenues for the first half of 2007 hit $10 billion--an increase of nearly 27% over the same period last year, according to the latest IAB Internet Advertising Revenue Report, released Thursday in conjunction with PriceWaterhouseCoopers.

Revenues for the second quarter of 2007 hit $5.1 billion--a 25% increase over the second quarter of 2006 and the first time that revenue for a single quarter exceeded $5 billion, according to the report.

"2007 is the year that the marketing officers of all the Fortune 1000 companies stood up and said, 'Oh my God, it happened, and I really have to get up to speed on it,'" said Randall Rothenberg, president and CEO of the Interactive Advertising Bureau, referring to the shift of marketing budgets online.

"This has translated quite obviously down the value chain as well," he added, "because this is the year that all the major agencies and media companies said, 'Digital transformation is our No. 1 priority' as well."

Search (41%), banners/display (21%) and classifieds (17%) continued to account for the highest percentage of ad spending online, the IAB reported. However, while search increased its share and banners/display ads remained constant, the proportion of online budgets allocated to classified ads dropped 3% from the first half of 2006.

Internet ad spending remained concentrated among the top 10 sellers online, which accounted for 70% of all money spent. Ninety-one percent of all ad dollars online were spent with publishers in the top 50.

One significant change from last year's report is that performance deals are now the leading pricing models, followed by CPM deals. In the first half of 2006, performance deals accounted for 47% of all online spending, and CPM 48%. Those numbers for the first half of 2007 were 50% and 45%, respectively.

Despite the optimistic findings, Rothenberg said that obstacles to further online growth remain.

"There are still discrepancies in how audiences are measured--agencies and marketers and certainly media companies want a lot more clarity and consistency," he said. "Another very serious problem is inefficiencies in the interactive advertising supply chain. It is very complex and thus very costly--more costly than it should be--to plan, buy, place, account for and optimize advertising sales. As an industry--as a cross-industry--we need to work together to create more efficiencies and much, much more simplicity."

This is the 11th year the IAB has produced the report, and the fifth year in a row that second-quarter revenues have increased after declining from 2001 to 2002.

"Obviously, the members of the IAB are very happy that this fast growth rate continues," said Rothenber. "It continues because interactive media continues to prove its ability to engage audiences and account for them at the same time."

A copy of the full report is available at www.iab.net/pwc_half_year_2007.

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