IAB/PwC Study Reveals 2007 Ad Spending Trends

  |  May 16, 2008   |  Comments

Display-related advertising grows slightly faster than search thanks to increased spending on video ads. Performance deals nudge out CPM pricing.

During full-year 2007 online marketing channels grew in roughly even proportions compared to 2006, and they all grew considerably. That's according to the full-year ad spending report issued yesterday by the Interactive Advertising Bureau and PriceWaterhouseCoopers.

Display-related advertising --including standard graphical ads, rich media, video and sponsorships -- commanded 34 percent ($7.1 billion) of the market in 2007, compared with 32 percent the year before. Search meanwhile creeped up from 40 percent to 41 percent of the pie. Both classifieds and lead generation advertising were down slightly, accounting for 16 percent and 8 percent of full-year revenues respectively.

Non-rich media display ads, when isolated, lost some ground year over year. They accounted for 21 percent of full-year revenues in 2007, compared with 22 percent in 2006. Their decline was most rapid toward the end of the year; they represented 21 percent of Q4 ad spending compared with 23 percent for the fourth quarter of 2006.

It should come as no shock that among channels, video was the shining star in 2007. The IAB/PwC report broke out video for the first time, noting it represented two percent of all online ad spending. It had previously been lumped in with rich media. Even without the contribution of video, rich media spending grew 1 percentage point year over year.

The vertical ad split was similarly unchanged. Consumer advertising continued to dominate, with 55 percent of industry category spending. In fact, the top five categories were all essentially unchanged since 2006. Financial services spending was the second biggest vertical with 15 percent of spending; computing came in third with 11 percent; telecom was fourth with 8 percent; and media ranked fifth with 6 percent. Within consumer categories, retailers were the biggest ad buyers (47 percent), followed by automotive (21 percent) and leisure (13 percent).

The IAB/PwC report also broke down ad revenues by pricing model. Whereas in 2006, CPM-based pricing accounted for 48 percent of revenues, last year that share shrank to 45 percent. Performance-based pricing meanwhile grew from 47 percent to 51 percent. Hybrid pricing models were essentially unchanged at 4 percent.

The findings were in line with preliminary estimates the IAB and PWC shared back in February, when it estimated online ad spending reached $21.1 billion on Internet advertising. The official number actually came out to $21.2 billion, 26 percent higher than in 2006.

Aggregate spending in Q4 2007 was $5.9 billion, representing a 13 percent sequential increase and a 24 percent rise over the year-ago period.

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ABOUT THE AUTHOR

Zachary Rodgers

Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects. 

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