Internet Ad Sales Up, But At Slower Pace

04/06/2009

According to a report recently released in March 2009, Internet advertising in 2008 may have risen but the growth is beginning to flatten. David Silverman, a partner at PricewaterhouseCoopers who helped create the report, states that the short term growth of the online advertising market has been hit pretty hard by the economy.

According to the Internet Advertising Revenue Report compiled by the Interactive Advertising Bureau, Internet marketing in the U.S. reached 23.4 billion dollars in 2008. This was an increase of 10.6 percent from 2007. This was actually the only advertising spending category with positive growth other than cable TV, which according to figures provided by Nielson for the report, grew by 7.8%.

The well known ratings company also reported that all non-Internet media decreased by 2.4 percent in 2008. The company found that network television spending decreased by 3.5 percent, national magazines decreased by 7.6 percent, and local newspapers decreased by 7.8 percent.

Although online advertising did grow when compared to other mediums, it did not experience the large increases that it has in years past. In the first two quarters of last year, Internet revenue dipped for the first time in 4 years. In 2008, Internet marketing had a growth rate of 2.6 percent which was the lowest growth rate when compared with the fourth quarter from last year.

According to Mr. Silverman, “it’s one of the few things that actually grew in the fourth quarter 2008.”

There were also some interesting shifts last year in the realm of online advertising. For example, digital revenue more than doubled itself from the previous year expanding to 734 million dollars in 2008 from 324 million dollars in 2007. Performance based ads became very popular this year and were used at an increased rate. This type of ad is when advertisers only pay when an ad is clicked or a product is purchased after following the ad.

In 2008 this type of ad made up 57 percent of all online advertising which was an increase from 2007’s 51 percent. Ads that charge according to how often they are shown, also known as CPM based ads, decreased in usage from 45 percent to 39 percent last year.

Another format known as sponsorship advertising, where publishers create custom pages and ads for brands also did not fare well. It dropped from 3 percent in 2007 to 1 percent in 2008 for all fourth quarter revenue.

Consumer based goods featured a healthy growth in online advertising revenue. In 2008 it rose to 1.5 billion dollars from 925 million dollars in the previous year. Peter S. Fader, a Marketing professional from the Wharton School of the University of Pennsylvania, sees this as being highly significant. According to him, this is something that would have been unthinkable even just a few years ago. It was never thought that the Web would be a wise place to sell grocery style products.

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