April 18, 2012, 4:27 PM

Online ad spending increases 22% in 2011

Retailers spent $7.1 billion on web advertising last year, a new report says.

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Online ad sales in the United States totaled $31.74 billion in 2011, up 21.9% from $26.04 billion in 2010, according to the Interactive Advertising Bureau’s Internet Advertising Revenue Report, released today. Last year was the first time online ad sales topped $30 billion. The trade group says the jump in spending from 2010 to 2011 marks a return to growth rates not seen since the 2006-2007 measurement period, before the economic recession.

Retail marketers accounted for the single largest chunk of online ad spending in 2011 when they spent $7.1 billion on online ads, 22.4% of the total. Retailers’ spending on web ads was up 29.1% from $5.5 billion in 2010, according to the IAB report, which is prepared by consulting firm PricewaterhouseCoopers from sales information provided by advertising companies and publicly available data.

Online advertisers spent $14.8 billion on paid search ads, accounting for approximately 46.6% of 2011 total online ad revenue. Spending on other ad formats, in descending order of total spending was display/banner ads, $6.8 billion and 21.4% of revenue; classifieds and directories, $2.6 billion and 8.2% of revenue; digital video, $1.8 billion and 5.7% of revenue; mobile, $1.6 billion and 5.0% of revenue; lead generation, $1.5 billion and 4.7% of revenue; rich media, $1.3 billion and 4.1% of revenue; sponsorship, $1.1 billion and 3.5% of revenue; and e-mail, $0.2 billion and 0.6% of revenue.

E-mail ad spending includes banner ads, links or ad sponsorships that appear within e-mail communications, such as newsletters and e-mail marketing campaigns.

Spending on mobile ads increased the most in percentage terms from 2010 to 2011, jumping 150% year over year from $640 million. “The year 2011 saw mobile advertising become a meaningful category,” says David Silverman, the partner at Pricewaterhouse Coopers who prepared the IAB report. “By combining some of the best features of the Internet, along with portability and location-based technology, mobile advertising is enabling marketers to deliver timely, targeted, relevant and local advertisements in a manner that was not previously possible. It is for these reasons that we expect strong growth to continue with mobile advertising.”

Online marketers continue to mostly pay for ads based on how they perform. 65% of 2011 ad revenue was generated through ads that were bought on a performance model, up from 62% in 2010, the report says. Ads paid for based on the number of impressions they received (a cost per thousand or CPM basis) accounted for 31% of 2011 ad revenue, down from 33% in 2010. Ads priced according to a hybrid model of performance and impressions accounted for 4% of revenue, down from 5% in 2010.

Kevin Ertell, chief marketing officer of OnlineShoes.com, will explain how he measures the performance of his web marketing investments in a session titled “The last click shouldn’t win” at the Internet Retailer Conference & Exhibition 2012 in Chicago in June.

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