Online Ad Revenues Continue Climb

Advertising revenues for the first half of 2005 are up 26 percent over the first half of last year. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers jointly released new second quarter figures and provided detailed information on how revenues were distributed.

Revenues grew 26 percent year-over-year for the second quarter, rising to $2.9 billion. That’s 26 percent higher than the same period in 2004 and a 6.6 percent increase over Q1 revenues. The total for the first half of the year was approximately $5.8 billion, which represents a 26 percent growth rate over the same year-ago period.

“Marketers may be shifting more of their total advertising budgets to online,” said David Silverman, partner at PricewaterhouseCoopers, in a statement. “This is a natural development as research shows more consumers are spending a larger percentage of their media time online, while the flow of advertising dollars follows.”

The top-tier publishers began to lose their grasp on the bulk of the revenues. Industry concentration for the top ten, 25 and 50 sites each lost a few percentage points as compared to the first half of last year, meaning advertisers are spreading some of their budgets to lower-tier publishers, and possibly blogs. In 2004’s first half, the top ten sites commanded 74 percent of spending, while in the 2005 period, that slipped to 72 percent.

The breakdown of revenues by ad format remains consistent in most categories as spending grows. In the first half of 2005, search continued to hold 40 percent of ad spending, but grew to $2.3 billion, compared to $1.8 billion in the first half of last year. One category seeing change was Referrals/Lead Generation, which brought in 6 percent of revenues this year, as compared to 2 percent last year. That change was likely due to a re-naming of the category. Previously, it was simply called “Referrals,” which isn’t an industry standard term. Sponsorships saw a bit of a dip, going from 9 percent of spending in the first half of 2004 to just 5 percent in the same 2005 period.

CPM and impression models grew to 48 percent, from 45 percent in the first six months of 2004. Performance deals reached 40 percent, from 38 percent for the same period last year, and hybrid revenues settled at 12 percent, down from 17 percent in 2004.

The Advertising Revenue Report represents data from a survey conducted by the New Media Group at PricewaterhouseCoopers. Figures are self-reported by publishers.