Nielsen and Others Show Slowing Online Ad Growth, But Numbers Vary Widely

Online ad spending topped $5 billion during the first half of 2007, a rise of over 23 percent, according to The Nielsen Company. That’s less than half the growth the firm reported for the year-ago period. And while TNS Media Intelligence also recently reported slowing growth in online ad spending, its growth estimate dropped just around a point from the year before, compared to Nielsen’s 26 point growth plummet. Indeed, there are also disparities in Internet ad spending estimates from other firms.

In its assessment of spending changes in each channel channel, Nielsen said Web ad dollars were up the most, but national magazines, outdoor and spot TV markets were also among the categories gaining over the first half of 2006. The firm found local and national newspaper display ads were down, along with network and cable TV and network radio. Advertising spending across all media categories tracked by Nielsen in the first half of the year dropped 0.5 percent below the same period in ’06.

The top ten online ad spenders from January through June 2007 were Experian Group Limited, NexTag, InterActiveCorp, Low Rate Source, AT&T, Verizon, Netflix, Countrywide Financial, Monster Worldwide and Vonage.

Nielsen estimates spending for all online advertising for January through June 2007 was approximately $5.2 billion.

The top spending advertiser verticals in the first half of this year according to Nielsen were Financial Services, Web Media, Retail Goods and Services, Telecommunications, Public Services, Consumer Goods, Automotive, Travel, Entertainment and Software.

The top five ad spenders across all media categories measured were Procter & Gamble, General Motors, AT&T, Ford and Johnson & Johnson. All reduced ad spending in the past year, according to Nielsen. The top ten ad spenders in 2007’s first six months spent $8.3 million, a drop of about 7 percent compared to the first half of 2006.

In reporting online ad spending, Nielsen referred to data collected by its Nielsen//NetRatings AdRelevance service, which only takes into account CPM-based display ads. That leaves out huge chunks of what Web advertising offers, including pay-for-performance ads, e-mail, in-stream video spots and paid search advertising, which accounts for the largest portion of online advertising.

“Not only are they not counting search, they’re not counting classifieds,” said David Hallerman, senior analyst at eMarketer, a firm that aggregates market data from multiple sources including Nielsen. Classified ads also account for a significant portion of Web advertising.

Nielsen is not alone in missing some forms of online ad spending. Recent data from TNS Media Intelligence on online ad spending in the first half of the year also tracks Internet display ads only.

Discrepancies in measurements of online ad revenue growth from report to report abound. While Nielsen pegs growth in the first half of ’07 at 23.6 percent higher than the same period last year, TNS is more conservative, marking growth at 17.7 percent.

In comparison, the recently-released Jack Myers Media Business Report projects Web ad spending will grow 20 percent this year.

The Interactive Advertising Bureau has yet to release its numbers for the first half of this year; however, the IAB’s report on online ad revenues for the first half of 2006, done in conjunction with PricewaterhouseCoopers, varied widely from Nielsen and TNS. TNS clocked online ad growth in the first half of ’06 at 18.9 percent over the same period the previous year.

The IAB’s and Nielsen’s estimates for the first half of ’06 were much higher. The IAB marked Web ad growth at 37 percent, while Nielsen reported it rose a whopping 49 percent over that period the year before. It should be noted the IAB tracks a variety of online ad formats, not just display advertising.

Of the online ad spending estimates he’s seen, Hallerman said most show around a 20 percent growth rate for 2007, and about $20 billion in spending by the end of the year.

“The hugest discrepancies come from definition,” said Hallerman. In other words, one measurement firm may categorize a particular type of ad as a display ad, while another may not.

At best, he suggested, these reports are good indicators of how the ad market and the Web ad sector are doing. “But it’s not as absolute as your bank account,” he added, “It never is.”

[UPDATE]:When originally reported, the story incorrectly stated that the top ten online ad spenders in the first half of 2007 spent $5.2 billion in Web ads. In fact, the total amount spent on online advertising by all advertisers was about $5.2 billion.