IAB: Online-Ad Spending Rose 10.4% in 2008

But Streak of Double-Digit-Growth Years Is Likely Over

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NEW YORK (AdAge.com) -- The good news in online advertising: 2008 was a pretty strong year, given the circumstances. Overall spending rose 10.4% from 2007 to $23.4 billion, driven by a nearly 20% increase in search advertising, according to the annual tally from the Interactive Advertising Bureau and PriceWaterhouseCoopers.

Good News for Google: Search advertising composed 45% of all online ad spending, up from 41% the year before.
Good News for Google: Search advertising composed 45% of all online ad spending, up from 41% the year before.
But then there's the not-so-good: Fourth-quarter spending was only slightly better (2.6%) than 2007, banner ads were down 4% and the five-year era of double-digit gains appears to be over, for now.

Smallest gain since 2001
Research firm eMarketer, which benchmarks all its online-ad projections on IAB/PWC data, predicts in 2009 online advertising will grow just 4.5% to $24.5 billion, the slimmest gain since 2001.

Inside the numbers, there's even worse news for online publishers, which depend on branded display advertising as their lifeblood. In 2008 search advertising took another bite of market share; it composed 45% of all online ad spending, up from 41% the year before -- good news for Google and for some ad networks, but not so good for online publishers.

The year also saw an accelerated shift away from cost-per-thousand-based pricing to performance-based ads. Performance advertising, which includes search and direct-response display, now accounts for 57% of all spending, up from 51% the year before.

Still spending
That said, some categories maintained spending despite troubling times. Automotive accounted for 12% of the market, the same as 2007, but the mix shifted heavily to direct-response from brand advertising. Share of online ad spend coming from retail and financial services declined, while consumer packaged goods grew share of spending, slightly. As the IAB was quick to point out, online ad spending did actually grow in 2008, unlike the overall ad market, which fell 2.6% in 2008, according to Nielsen Co.

Another small bright spot was spending on digital video, which more than doubled in size to $734 million in 2008 from $324 million the year before.

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