In an upbeat report this morning, the Interactive Advertising Bureau reported that internet advertising in the U.S. grew 10.6 percent to $23.4 billion. (The entire report is embedded below). And the $6.1 billion fourth quarter (up 2.6 percent) was the first time Internet advertising surpassed the $6 billion mark. That said, the rate of growth declined both on an annual and quarterly basis. Even the 4.5 percent sequential growth over the third quarter was the lowest since 2002 (as was the annual growth rate).
But the sequential growth showed a promising uptick in the fourth quarter compared to the previous three quarters, as the chart above shows. This rebound is also in line with what the four big Web advertising companies (Google, Yahoo, Microsoft, and AOL) saw in the fourth quarter. Interestingly, it is divergent from the online revenue trends newspapers are seeing (their online revenues were actually down 1.8 percent last year).
Search advertising dominated, with 45 percent of total Internet advertising market share. It also grew 20 percent for the year. The only category which grew as fast was rich media and video. Online video advertising grew faster than any other sub-category, with 123 percent annual growth (going from $324 million in 2007 to $724 million in 2008). Display advertising was able to eke out 8 percent growth for the year, but declined 4 percent in the fourth quarter.
Performance-based advertising widened the gap over plain-vanilla impression-based advertising (CPM) last year, with 57 percent of all internet advertising revenues being performance-based versus 39 percent being CPM-based. That 18 percent gap widened from a 6 percent gap last year.
The IAB also trotted out some numbers showing that Internet advertising revenues are outpacing TV advertising by some measures. The $23.4 billion in annual internet advertising spending exceeded advertising on cable TV for the first time (which was $21.4 billion), and took the No. 3 spot behind national and local TV ads ($29.8 billion) and newspaper ads ($34.4 billion).
And in a new analysis comparing the first 14 years of Internet advertising revenues to the the first 14 years of cable and broadcast TV advertising, the IAB found that Internet advertising surpassed cable TV advertising in Year 4 ($907 million versus $499 million) and broadcast TV advertising in Year 10 ($9.6 billion versus $8.9 billion). Now, in Year 14, Internet advertising is almost twice as large as broadcast TV advertising was in its 14th year ($13.3 billion) and nearly four times as large as cable TV ($6.5 billion).
IAB 2008 Report – Get more Information Technology
This is racist.
huh?
Banner ads evolution is long due. Market leader Yahoo is out of ideas, dont expect from evil Goog as it wants banners to die. Mouse-over interaction would be future of banners, IMO.
Again, hybrid of CPM and CPC is dying I dont understand why. Is Goog killing it??
Ignore the trolls. Great report.
I’m sorry, I don’t understand. Could you explain why the sales graph is racist?
I can’t. After having just attended the 3rd Diversity Training session per my company’s requirements, I am simply following orders to scream racism if and when I have nothing useful to say.
which goes to show you can never be too careful
Your comment was racist.
Good one. I see you guys are catching on. My diversity instructor would be proud.
% of revenue from performance-based ads: 57%
% of revenue from CPM ads: 39%.
That’s the biggest stat you left out.
No that figure is in there, read more closely!
Here’s the link to the full report:
http://www.iab....8_full_year.pdf
Internet advertising….what a failure.
Why?
http://www.smartbloggerz.com
And yet you allow a professor to make a post predicting the death of “Internet advertising” without much substantive data to backup the claim?
I know that as the editor you are aware of the lameness of the article. But instead of demanding a proper justification for the argument, you don’t mind making the post so long as it is provocative.
That’s fine. Provocative will get you more traffic in shot-term. But the fact that you can’t get a provocative post WITH substance speaks of your bad job.
More posts like these. Fewer provocative posts that turn into dry air moment you finish reading the first paragraph.
These data are why the Internet advertising industry is not going anywhere. I believe that the advertiser’s budget will simply be reshaped to include a majority of advertising being Internet based, rather than other media.
This is good to hear. Online video advertising has a growth rate of 123%, I’d be curious to see a graph of just online video advertising.
I am not Michael Grandfield ops there is a bug somewhere
FYI, Crunchgear appears to be taking a dump right about now.
Are the growth numbers adjusted for inflation?
I love the 14-year comparison. It shows how quickly the Internet has grown over the past few years. It still blows my mind to see how much advertisers spend on newspaper ads. Nearly $35 billion a year!!
Great post, Erick.
Hopefully this report will reduce some of the mindless chatter that you can’t build an Internet business model based on advertising. Clearly there is still a large and growing pot of advertising dollars to be had out there. The key for any media company, whether online or off, is keeping your costs in line with your potential revenues.
what about the other side of the equation, or am I missing it? The reason why the brands are spending all of this money is for return. So what is the average ROI for all of this spend? In soft awareness? Conversion is the real number we are looking for. And it’s tricky to really get the right metric on that since it can certainly extend into other channels. Insights, anyone?
Great to see these stats from IAB. Thanks for surfacing. Performance-based campaigns coupled with more immersive/robust rich media experiences will inevitably help spur growth in the online media world. The easier it is for marketers to develop, execute and optimize these sorts of ROI-campaigns, the steeper the revenue trajectory.
Classifieds are still a 3 billion dollar industry. WTF. CRAIGSLIST, you ding dongs.
How big is the online Advertising market worldwide? Any pointers to some reports I should read?
Alex
great post, eric. check out a contrarian view point http://www.busi...o-a-halt-2009-3
I expect performance-based advertising to grow much faster in the next two years. Advertisers are now aware of the benefits and are staying away from CPM campaigns because it is akin to recklessly throwing your money out the window.
I can´t wait for internet advertising to surpass local and TV ads. It´ll usher in a seismic shift in the whole advertising industy to the advantage of internet companies.
This shows that brand marketers and agencies are finally recognizing the effectiveness of online video advertising. One of the reasons why the use of online video ads is growing is because great advertising opportunities are no longer limited to those who can afford television buys.
Smaller advertisers and emerging brands can now align with niche publishers who are building passionate audiences around quality niche content.
Read more at http://endavome...-equalizer.html
if you compare the changes in ad spending (2008 vs 2007) among various industry sectors in this report; there are some bright spots even in this rather gloomy environment for ad dollars. Ad spending among CPG, Telecom, Computing and Automotive advertisers grew faster then the average in 2008. Refer to my post for details: chintu.eparikh.com
you guys should check out canoe ventures…its the cable industry’s initiative to bring relevance and measurability to the TV.
In 1920 majority of shareholders sold their stake in Ford because they insisted the auto industry had reached its peak. Maybe they were right in light of the events with the Big 3 recently.
Many are saying that Online Advertising has reached its peak already.
Major trends follow the S-curve where it takes 50% of the time to reach 10% of the market and the same amount of time to reach 90%.
With that logic, online advertising is now at 8-9% of all marketing budgets. It would be a strong indicator then in the next 10-12 years it will be 90%.
We are about to witness a major shift and transfer of wealth. Which side will you be on?
Online Advertising with FreeKii.com served over 40 million ads in 2008.
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