Internet ad sales gain 35% to hit record $16.9 billion
Internet advertising revenue in the U.S. gained 35% in 2006 over the previous year to hit a record $16.9 billion, according to the Internet Advertising Revenue Report released by the Interactive Advertising Bureau and PriceWaterhouseCoopers. Fourth quarter revenue last year totaled $4.8 billion, also a record for a single quarter, representing a year-over-year increase of 35%.
Paid keyword search, for the second year in a row, accounted for the largest share of online ad revenue. At $6.8 billion it accounted for 40% of all online ad spending compared with 2005, when at $5.1 billion it accounted for 41%.
Display advertising—a category also including sponsorships, slotting fees and rich media such as broadband video—accounted for 32% of 2006 online ad revenue. At $5.4 billion, it was up from $4.3 billion in 2005, but down from last year’s share of 34% of all online ad revenue. Display advertising alone came in at $3.7 billion last year, or 22% of the online ad spend, up from the prior year’s $2.5 billion and 20% share.
Classified advertising at $3.1 billion represented 18% of spending share, up from $2.1 billion and 17% the prior year. E-mail at $300 million and lead generation at $1.3 billion accounted for, respectively, 2% and 8% of online ad spending.
Spending was split fairly evenly between the top two pricing models, with 48% of spending, or $8.2 billion, going to CPM or impression-based ads and 47%, or $7.9 billion, going toward performance-based deals. Both types of pricing gained in dollar volume and market share from the previous year at the expense of hybrid deals combining the two. At $0.8 billion, representing the pricing model for 5% of all online ad spending, hybrid pricing dropped significantly from 2005, when at $1.6 billion it represented 13% of online ad spending.
“Interactive advertising revenues continue to show solid growth as advertisers and agencies recognize that it is a medium that can uniquely affect consumer behavior from product awareness, to purchase intent, to actual purchase and then brand loyalty,” says Randall Rothenberg, IAB president and CEO. Rothenberg predicts that the growth trend will continue as marketers shift more of their marketing budget online.
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