Internet advertising soars in the US

Gravy train

Online advertising revenues in the first half of this year soared to a new high of around $5.8 billion in the US – up 26 per cent over the first half of 2004, according to figures released yesterday by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC).

Revenue for the second quarter of 2005 totalled $2.985bn, representing a 26 per cent increase over the same period in 2004, and a 6.6 per cent increase on revenues earned in the first quarter of 2005.

"The consistent growth in overall revenues shows marketers may be shifting more of their total advertising budgets to online. This is a natural development as research shows more consumers are spending a larger percentage of their media time online, while the flow of advertising dollars follows," said David Silverman, Partner with PwC.

The figures form part of the bi-annual Internet Advertising Revenue Report, prepared by PwC and sponsored by IAB, which is not due for publication until the first week of October. The figures were released early to coincide with the MIXX Conference and Expo, being held in New York at the moment.

According to IAB, the percentage of total online ad revenues earned by keyword-based search ads has remained at 40 per cent– the same percentage as it was in the first half of 2004. But the amount of revenue represented by this percentage has jumped from $1.8bn to $2.3bn.

It is a similar story for display ads, which accounted for 20% of total online ad revenue in the first six months of both 2004 and 2005, but for which earnings jumped from $0.94bn to $1.15bn.

Classified ads accounted for 18 per cent of online ad revenue in the first half of this year – up from 17 per cent for the same period last year, while online sponsorships fell from nine per cent in the first six months of 2004 to five per cent for the same period this year.

With regard to pricing models, impression-based pricing increased in popularity to 48% in the first half of this year – up three per cent on the first six months of 2004. Performance-based deals grew two per cent to 40 per cent, while hybrid deals fell from 17 per cent to 12 per cent.

Meanwhile, Microsoft has announced the launch of its first venture into paid search ads, taking on the better-established businesses of Google and Yahoo!

The service, known as adCentre, began in Singapore on 31st August, and launched in France yesterday. It is due to begin testing in the US in October.

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