Online Ad Revenue Nears $2 Billion Mark in Q1

Internet advertising is fast approaching the $2 billion per quarter mark as revenues for the first quarter of 2000 hit $1.953 billion, according to the Internet Advertising Bureau’s (IAB) Internet Ad Revenue Report.

The report, conducted by PricewaterhouseCoopers, also reported that revenues for the first quarter grew 9.9 percent over the fourth quarter of 1999, and 182 percent over the comparative first quarter of 1999. In addition to monitoring banners, sponsorships, interstitials and email, the report will also tracks classifieds, referrals, rich media, and keyword searches.

“We have become accustomed to the continued sustained growth of online ad revenues and the report for the first quarter of 2000 continues that very positive trend. What is of prime importance is that we have even greater growth than we had last year with even larger numbers,” said Rich LeFurgy, Chairman of the Internet Advertising Bureau and General Partner of WaldenVC. “While the market correction and subsequent dot-com closures likely had some impact in slowing growth in the second quarter, the continued and growing numbers of large traditional advertisers expanding their budgets for Internet campaigns are really the news here. Time will tell what effect, if any, recent developments will have on the growth of online advertising, but the combined brand building, targeting, one-to-one marketing and e-commerce capabilities of the Internet will continue to fuel revenue growth throughout the year.”

According to the report, the leading categories for online spending during the first quarter were consumer-related (31 percent), financial services (15 percent), computing (15 percent), new media (12 percent) and business services (10 percent). The report also found that the overwhelming number of revenue transactions, (94 percent) continue to be cash-based with barter/trade and packaged deals accounting for 5 percent and 1 percent of total revenues, respectively. Banner advertisements continue to be reported as the predominate type of advertising, accounting for 52 percent for Q1, sponsorships at 27 percent, interstitials at 3 percent, and email at 3 percent. The types of advertising being delineated for the first time include classifieds (4 percent), referrals (3 percent), rich media (2 percent) and keyword searches (1 percent). All other ad types accounted for 5 percent of the total.

The continuing strength of e-commerce was also reflected in the report. Hybrid deals accounted for 48 percent, with CPMs or impression-based deals at 42 percent and performance-based deals at 10 percent for the quarter.

“An indication of the health of the online advertising industry is that there are no major surprises here,” said Tom Hyland, Chair, PricewaterhouseCoopers New Media Group. “In fact, the higher rate of growth on a higher base, while not totally unexpected, points to the robustness of the medium as it matures. With no major upheavals for the first quarter of 2000, growth has remained steady and consistent across all of the areas we track. An additional healthy sign of the industry’s maturation is the growth of ad types, allowing us to reflect the growing use of classifieds, referrals, rich media and keyword searches.”