April 29, 2005, 12:00 AM

Internet advertising revenues rise 33% to hit $9.6 billion

Retail advertising accounted for $1.86 billion or 20% of all online ad spending last year, says an IAB/PwC report. Search leads all ad formats, representing 40% of all Internet ad revenue.


Spurred by a retail sector that accounted for $1.86 billion or 20%, online ad spending across all formats and industries ballooned to $9.6 billion in 2004, up 33% over last year, according to a report just released by the Interactive Advertising Bureau and consultants PricewaterhouseCoopers. Fourth-quarter 2004 online ad revenues totaled $2.69 billion, making it the highest quarter ever reported.

“Interactive advertising has clearly become a mainstream medium and one that can no longer be ignored as a critical piece of any marketing mix,” says Greg Stuart, IAB CEO. Interactive advertising, he adds, is on track to surpass consumer magazine ad revenues.

Consumer advertisers continue to represent the largest category of online advertisers, accounting for 49% of 2004 Internet ad revenues. Computing and financial services accounted for 18% and 17%, respectively, of 2004 total ad spending, while pharmaceutical and healthcare accounted for 6% and telecommunications represented 4%.

Within the consumer category, 2004 online ad spending in the retail subcategory accounted for 40%, followed by automotive at 19%, entertainment at 13%, leisure at 16% and packaged goods at 7%. The report provided figures for the largest subcategories only.

Search advertising lead all other ad formats, representing $3.8 billion or 40% of all Internet ad spending in 2004, up from 35% of all online ad spending the previous year. All display advertising, which also includes sponsorships, slotting fees, and rich media, accounted for $3.8 billion or 39% of the year’s online total. Classified ads at $1.7 billion or 18%, e-mail at 1% and referrals at 2% filled out online ad spending by format.

Revenues for performance-based online advertising gained year to year, rising to 41% of the total from 37% in 2003. While still the largest category of pricing model, CPM and impression-based online ad spending dropped to 42% in 2004 from 43% of the total in 2003. Hybrid ads accounted for 17% of all ad spending down from 20% in 2003.

“The revenue results reported for 2004 confirm a very healthy environment for online advertising, for both direct marketers seeking immediate performance results as well as brand advertisers looking to create or enhance an image, product or service,” says Peter Petrusky, director, advisory services, PricewaterhouseCoopers.


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