Online Ad Spend Pushing the $5 Billion Mark in Q1 2007

Interactive advertising revenues continued to increase in Q1, nearing the $5 billion mark, according to the latest report by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC).

Internet advertising revenues reached a record $4.9 billion in the first three months of 2007, a 26 percent increase over Q1 2006 at $3.8 billion, and a 2 percent increase over Q4 2006 at $4.8 billion. The annual spending report for 2006 also shows combined revenues approaching $17 billion.

The “IAB Internet Advertising Revenue Report” held no major surprises, according to Sheryl Draizen, senior vice president and general manager for the IAB, who said a steady increase in interactive advertising dollars has been going on for some time.

“It’s what we’ve been seeing for awhile. We’re seeing increases in search, display, lead generation, in classifieds, we’re seeing increase across the board,” said Draizen. “All pieces of interactive are really firing on all pistons.”

Draizen believes marketers are increasingly taking a serious look at interactive media advertising. She also said marketers are no longer merely going to cannibalize other media budgets to experiment with interactive, but will reassess their entire advertising budgets.

“What were’ seeing is that marketers are clearly experiencing the effectiveness of the medium, so more and more dollars are being allocated to interactive as a whole. Marketers are also starting to understand that interactive is the only medium that can impact across purchasing funnel,” she said. “What I think is going to start to happen is marketers are going to look at their entire marketing budget and think how they are not only reallocating from other media, but looking at their entire promotional budget.”

In a separate survey, the IAB’s European division, along with PwC, found interactive advertising in Europe has reached $10.8 billion (€8 billion) in 2006, with the U.K. taking up the lion’s share at 39 percent of online advertising spending, followed by a distant 22 percent in Germany, and 15 percent for France. The majority of spending revolved around search-related advertising, at 45 percent according to the study, while 31 percent went to display advertising, 22 percent to classifieds and 1.6 percent on e-mail marketing.

The IAB conducts the study with measurement firm PricewaterhouseCoopers by collecting survey information on online advertising revenues from Web sites, commercial online services, free e-mail providers, and all other companies selling online advertising.

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