Report: Online Ads Poised for Growth

A recent study has found that online advertising is holding its own compared with traditional advertising revenue . And analysts expect the current steady state to give way to growth as soon as economic news improves.

Online ad revenue in the United States declined 7.5 percent in the fourth quarter of 2001, according to a study released Thursday by PricewaterhouseCoopers and the Internet Advertising Bureau (IAB), and was down 12 percent versus 2000. Revenue totaled US$1.7 billion in the fourth quarter of 2001 and $7.2 billion during all of last year.

The IAB's findings are in line with measurements by other industry watchers and come as little surprise, considering last year's overall advertising environment.

Banners, sponsorships and classified ads are still the three top online formats, the study showed. Banner ads posted a 12 percent decline, and sponsorships slipped 2 percentage points, but online classifieds more than doubled from 7 percent to 16 percent of the total market, according to the IAB's fourth-quarter report.

Dissecting Data

"It's no secret that the slowing economy, combined with the very responsible actions by advertisers and media outlets in all sectors [after September 11th], has had an impact on the results for 2001," said Greg Stuart, IAB president and CEO.

Stuart said that industry fundamentals -- a growing installed base of Internet users, more attractive demographics and better accountability -– are firmly entrenched. The challenge now, he added, is to improve the medium.

"Unlike other ad-supported media platforms, the Internet advertising industry has the ability to learn quickly from its research and foster positive change for the benefit of advertiser growth and spending," said Tom Hyland, the leader of PricewaterhouseCoopers' new media group.

What, When, How?

One way in which the medium is improving is through more innovative ads, according to Charles Buchwalter, Nielsen//NetRatings' vice president of media research. Rich media ads use Java or HTML to add movement or sound to banners, and users are not required to leave the site to interact with such banners.

Buchwalter told the E-Commerce Times that rich media ads are gaining ground on static banner ads, with large, traditional advertisers leading the pack.

That is occurring because traditional advertisers understand the formula behind emotional, brand-building TV ads, according to Buchwalter, and rich media is showing them that they can accomplish the same goals online.

"The areas that we see continuing to grow in terms of share of online advertising are these new forms of rich media," he said. "The continuing experimentation and innovation is the saving grace of the industry."

Online Ads Poised for Growth

Buchwalter said online advertising is poised for growth. The question, he said, is how long it will take for positive news about the broader economy to impact marketing budgets.

The IAB agreed. "The Internet is an attractive place," IAB spokesperson Stu Ginsburg told the E-Commerce Times. "There are a lot more larger, traditional advertisers mounting online campaigns timed to complement their offline efforts."