IAB: Web Revenue Down, But We’re Still Strong

NEW YORK — Web advertising revenues dropped slightly from last quarter, according to the Interactive Advertising Bureau, though industry leaders touted the space’s strength as compared to other media types.

According to figures compiled by PricewaterhouseCoopers for the New York-based IAB, the online advertising sector brought in $1.792 billion in revenue during third quarter, down 4.1 percent from last quarter. In the second quarter, the IAB and PWC reported a 1.32 percent decline, from $1.893 billion to $1.868 billion.

All told, the first nine months of 2001 saw revenue of $5.55 billion, down 8.4 percent from last year.

While the industry continued to experience declining revenue, IAB representatives, speaking at the group’s annual meeting in New York City, pointed to the fact that all media are seeing contraction and that Web advertising’s performance is simply in line with across-the-board levels.

Indeed, Web ad leaders are quick to point to reports from industry-watchers like Robert Coen at Universal McCann, who pegged overall advertising revenues — traditional and new media — to decline about 4 percent during 2001.

And that’s a reassuring sign, said IAB president and chief executive Greg Stuart, suggesting that advertisers are now treating the Web much like any other channel.

“The $1.792 billion in revenue for the quarter indicates that the Internet is holding it’s own against what we have been hearing about other advertising sectors, indicating that, contrary to popular belief, advertisers are not deserting the medium and in fact are committed to the Internet long term,” Stuart said.

“You may argue about [this], but we’re in good shape,” he added during opening remarks at the IAB meeting. “The Internet is a great buying medium … And we’ll probably have to talk with Coen at McCann … their figures are not as good as ours.”

Stuart also said that while online advertising continues to slip, it’s at least no longer subject to drop-offs like the 14 percent decline from fourth quarter, 2000, to the first quarter of 2001.

“While the online revenue reported has shown little change from the previous two quarters, the fact that our industry is holding steady should be looked at as a positive sign,” he said.

The IAB said that consumer-targeted ads — more than half of which were retail-related — continue to be the largest segment, bringing in 29 percent of the industry’s revenue, or one percent less than last quarter. Computer-related advertising brought in 19 percent, one point greater than in second quarter.

Business services advertising’s piece of the pie also grew during the quarter, from 8 percent to 10 percent. Media fared similarly, increasing its spend to 14 percent of the industry’s overall revenue, up from 10 percent.

Meanwhile, financial services advertising decreased as a percentage of overall spending, down one percent from last quarter to 12 percent.

The IAB also said that the largest players continue to dominate industry spending, with the top ten online media companies bringing in 75 percent of the revenue — one percent lower than last quarter.

The group also said that performance-based pricing had seen increased interest, while CPM advertising deals declined. In third quarter, straight impression-based pricing accounted for 48 percent of all revenue, down from 51 percent. Deals based strictly on performance rose three percent, to 13 percent. Hybrid arrangements stayed constant at 39 percent.

Ad formats also continued to shift, albeit slowly. Banners declined slightly — one percent — in terms of their share of overall revenues, bringing in 35 percent. Sponsorships also declined by about 3 percent, to 25 percent of all revenue. Slotting fees, charged for premium placement, made up 7 percent of third-quarter revenues, down one percent.

But classified ads picked up by the same, now comprising 17 percent of the total market. Keyword buys on search engines also saw growth, rising 2 percent during the quarter, to 5 percent.

Rich media ads also saw one percent growth, to 3 percent — the first sign of their expected proliferation since the IAB approved larger, rich media-friendly ad formats in February. Since rich media ads are believed to be more compelling than static creatives, industry-watchers see the trend as critical for the Web ad sector’s development.

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