Online Ad Spending Hits $4.8 Billion in Q4 2006

Online ad revenues continued to grow at a quick pace in Q4 2006, reaching nearly $4.8 billion, according to numbers released today by The Interactive Advertising Bureau (IAB) and its independent research partner PricewaterhouseCoopers. It’s the highest reported quarter yet for the industry, with revenues up 32 percent over Q4 ’05. The report anticipates total 2006 revenues, to be revealed next month, to clock in at $16.8 billion.

In the past 18 to 24 months especially, said IAB CEO and President Randall Rothenberg, “Major marketers in all categories are coming around to the fact that, yes, the Internet is a great direct sales tool, but in addition it’s a great brand building and brand awareness tool as well.”

Along with traditional advertisers dedicating more dollars towards online ads, local and smaller businesses are also contributing to the steady rise in Web ad spending, said Rothenberg. Small companies originally moved online to use sites like Ebay, and more recently started running more paid search campaigns, “Now we’re seeing [small and local advertising] across all kinds of sites,” he added.

While spending continues to increase, the rate of growth has slowed slightly. At $4.8 billion, revenues in Q4 2006 represent an increase of 15 percent over Q3 2006, when spending on online advertising hit $4.2 billion. In Q4 2005, Internet ad revenues were up 34 percent over the same period in ’04, reaching $3.6 billion.

The IAB estimates total 2006 spending to come in at $16.8 billion, an increase of 34 percent over previous record spending of $12.5 billion the previous year. The research partners pegged 2004 revenues at $9.6 billion.

In addition to increased spending online by more advertisers, Rothenberg said rising revenues are a result of a general boost in the cost of online advertising and related services. He also believes marketers of all stripes now recognize the value of Web advertising for its ability to fulfill multiple campaign goals and offer specific measurement data. That, he added, is piquing interest in the medium from senior marketing executives.

“Chief marketing officers and their senior marketing teams are now paying very direct attention to the potential of online media to drive their businesses,” he told ClickZ News. “The importance of the Internet has climbed up the food chain at marketing companies.”

The fourth quarter figures and full 2006 estimates, sponsored by the IAB, were calculated by PricewaterhouseCoopers based on surveys and aggregated data from the top 15 online advertising sellers.

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