Ghost of Midnight

Online Advertising Growing

Greg Sterling wrote about online advertising revenue projections this week…

According to the just-released IAB/PwC online ad revenues report, US online ad spending reached $5 billion for the second quarter and $10 billion for the first half of 2007. Year over year growth was just over 26%. Online ad revenues should hit or exceed $20 billion for the full year, 2007.

The distribution of revenues across ad categories is also follows:

• Search remains the largest revenue format, accounting for 41 percent of 2007 first six-month revenues. Search advertising revenues totaled $4.1 billion for the first six months of 2007.
• Display-related advertising revenues totaled $3.2 billion or 32 percent for the first six months of 2007. Display-related advertising includes Display ads (21% of 2007 first six-month revenues or $2.1 billion), Rich Media (7% or $699 million), Broadband Video (1% or $100 million), and Sponsorship (3% or $300 million).
• Classifieds revenues accounted for 17 percent of 2007 first six-month revenues or $1.7 billion.
  Lead Generation revenues accounted for 8 percent of 2007 first six-month revenues or $799 million.

What’s striking is that:

Online advertising continues to remain concentrated with the ten leading ad-selling companies, which accounted for 70 percent of total revenues in the second quarter of 2007.

Assuming that the projections are fulfilled and US Internet ad revenues reach $20 billion, that will mean that as an ad medium the Internet is larger than:

• Yellow pages
• Radio
• Outdoor
• Most categories of TV (though not in the aggregate)
• Most categories of magazines

But consumers don’t trust online ads vs. traditional media advertising. That’s a problem for marketers that want to shift more of their budgets online to pursue those audiences. Internet ads have to be done much more thoughtfully than traditional advertising.