October 9, 2008, 12:00 AM

Search marketing leads 15% rise in Internet ad spending

U.S. Internet ad revenue rose 15.2% year-over-year for the first half of 2008 to $11.5 billion. Search ads rose 24% to $5.1 billion while online display ads rose 19% to $3.8 billion, the Interactive Advertising Bureau and PricewaterhouseCoopers report.

With a strong boost from spending on search ads, Internet advertising revenue in the U.S. rose 15.2% year-over-year for the first half of 2008 to $11.5 billion. Search ads rose 24% to about $5.1 billion while online display ads rose 19% to $3.8 billion, according to the IAB Internet Advertising Revenue Report from the Interactive Advertising Bureau and consultants PricewaterhouseCoopers.

“Due to the unique efficiency and effectiveness of targeted and measurable campaigns, Internet advertising has shown strong growth in the first six months of 2008, compared to the same time period last year,” says David Silverman, partner, Entertainment, Media & Communications Practice, PricewaterhouseCoopers. This growth has come in spite of an environment that has put significant pressure on the advertising industry in general.”

Growth in online ad revenue slowed a bit in the second quarter to a year-over-year rate of 12.8%, and online ad revenue showed a slight decline of 0.3% in Q2 over the first quarter, the report says. “The essentially flat performance we see quarter to quarter reflects in part cyclical advertising trends,” says Randall Rothenberg, president and CEO of the IAB. “Compared to the trajectory in other media and in the general economy, interactive has outperformed because it delivers a level of accountability unmatched by any other advertising medium.”

Gian Fulgoni, chairman of comScore Inc., says measuring the impact of online advertising on offline as well as online sales is becoming more common among retailers, who for the most part are seeing a strong impact of e-marketing on offline sales. A study comScore conducted of online advertising by multi-channel retailers found that search advertising in the first half led to an 82% increase in offline sales and that display ads led to an increase of 16%. When search and display ads were combined in the same campaign, they led to an increase in offline sales of 119%, he adds.

“Most multi-channel retailers are happy with what they’re seeing in performance of CPM and CPC,” he says. CPM is a common online ad industry term meaning cost per thousand impressions; CPC represents cost per click of online ads, which marketers measure against their marketing goals.

The Internet ranked third in advertising revenue in the second quarter but showed the largest year-to-year increase, according to data from the Nielsen Co., the IAB and PricewaterhouseCoopers. Spending on Internet advertising in Q2 rose 13% to $5.7 billion, while spending on spot TV ads rose 11% to $6.4 billion and spending on cable TV rose 4% to $6.9 billion.

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