Interactive Advertising Bureau - IAB - Reports $8.2 Billion Online Ad Revenue in the United States for Year 2000

Business Wire, April 23, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--April 23, 2001

Fourth Quarter Totals $2.2 Billion;

Gain Over Q3 2000 Slows to 9 Per Cent

Internet advertising in the United States recorded $2.2 billion in revenue for the fourth quarter of 2000, bringing total online revenue for the year to $8.2 billion, according to the Interactive Advertising Bureau's (IAB) Internet Ad Revenue Report which is conducted independently by the New Media Group of PricewaterhouseCoopers. While the $2.2 billion shows an increase of 9 per cent over the $1.986 billion for the third quarter of 2000, the percentage increase is markedly lower than historical levels, and according to the IAB and PricewaterhouseCoopers, it is reflective of the overall slowdown in ad revenue across all media sectors, in addition to a higher revenue base.

"The turbulence that has affected all advertising sectors in the past six months has also quite naturally impacted the Internet. While we have continued to grow as an industry, that growth has been tempered by the times, and I would expect that we will see this reflected in future reports," noted Robin Webster, President & CEO of the IAB. "I believe that all interactive media have the ability to react quicker and with more creativity than more traditional advertising platforms, and can offer advertisers compelling new formats and channels to reach consumers. The new Interactive Marketing Unit guidelines that the IAB issued recently are a case in point. Their usage is growing and our members are reporting indications of success and acceptance by consumers. I am confident that we will continue to see the growing emergence of new ad formats and the integration of overall campaigns, with the Internet becoming an increasingly important part of the media buy."

Commenting on the report, Tom Hyland, Chair, PricewaterhouseCoopers New Media Group noted: "The message to be taken out of this report is that the Internet is a strong advertiser medium. As one might expect, the advertising community is intent on reaching the 140 million plus online audience, but they are being more selective in their approach. That is why we see a higher concentration of ad spending in the top tier sites. Like most ad-supported media, this advertising medium is not a level playing field and the big continue to get bigger."

The categories which lead online spending during the fourth quarter of 2000 were:

-- Consumer-related (32%) - year 2000 (31%)

-- Computing (21%) - year 2000 (18%)

-- Financial Services (13%), - year 2000 (14%)

-- Business Services (6%), - year 2000 (9%)

-- Media (9%) - year 2000 (8%)

The report also found that in the fourth quarter the vast majority of revenue transactions, 92%, (93 % for the year) continue to be cash-based with barter/trade and packaged deals accounting for 7%, (6 % for the year) and 1% (1 % for the year) of total revenues respectively.

While it is too early to gauge the impact of the new and larger Interactive Marketing Units, innovation in Internet advertising formats and models continue to impact overall share, most notably reflected in lower banner revenues, which have decreased considerably in the fourth quarter, accounting for 40% of the quarter's online ad revenues (down from 46% in Q3 and 47 % for the year) with sponsorships 31%, (28 % for the year), classifieds 10%, (7 % for the year), referrals 5%, (4 % for the year), interstitials 5%, (4 % for the year), email 4%, (3 % for the year) , rich media 2%,(2 % for the year) and keyword searches 2%, (1 % for the year).

"The Internet, as a vehicle for advertisers, is still in its infancy, a fact that most observers of the industry forget," noted IAB Chairman Rich LeFurgy. "As our base gets bigger and bigger, the days of double and triple digit growth are gone, as they would be for any industry that grew at the rate that the Internet did. While the overall economy has played its part in the slowdown, we would have stopped growing at the previous rates anyway. We're a reality-based industry now, and in the long run that may be the most important thing for the industry's long-term health. I fully expect that in the next few years, the Internet will continue to generate solid revenue growth, and with the emergence of revenue from the wireless and ITV advertising industries, interactive advertising will set the pace going forward."

Conducted by the New Media Group of PricewaterhouseCoopers on an ongoing basis, with results released quarterly, the "Advertising Revenue Report" was started by the IAB in 1996, and represents data from all companies that sell meaningful online advertising revenues. The results reported are the most accurate measurement of online advertising revenues since the data is compiled directly from information supplied by companies selling advertising on the Internet. All-encompassing in nature, the survey includes data concerning online advertising revenues from Web sites, commercial online services, free e-mail providers, and all other companies selling online advertising.