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Internet Ad Revenue Tapers Off a Bit in Third Quarter

Improvement Expected for Next Period, but Growth for '07-'08 Expected to Stall

By Published on .

NEW YORK (AdAge.com) -- Internet advertising revenue reached $4.1 billion in the third quarter, according to the latest figures, compiled by PricewaterhouseCoopers for the Internet Advertising Bureau. Surprisingly, while that figure is up 33% over the third quarter of 2005, it only represents a 2% increase over the second quarter.
PricewaterhouseCoopers predicts that internet ad revenue will increase by only 24% this year.
PricewaterhouseCoopers predicts that internet ad revenue will increase by only 24% this year.

"There's a seasonality at play and that has been masked in the past couple years because of the strong growth," David Silverman, partner-assurance, PricewaterhouseCoopers. Traditionally the first- and third-quarter ad markets are softer.

Next two years
Internet ad-spending growth is indeed tapering off a bit. According to PwC projections, 2006 internet ad growth will be 24%, compared to above 30% growth levels for the previous two years. In 2007 and 2008 it's expected to total 19% and 15.1%, respectively.

Third quarter was also the period in which Yahoo revised down its ad revenue projections, citing weakness in the auto and financial categories -- although other online media companies said the trend was confined to Yahoo. Still, Yahoo takes in about 18% of every online ad dollar, according eMarketer estimates, so its weakness would be felt industry wide.

Mr. Silverman said he expects to see strengthening in fourth quarter, traditionally a very strong time for consumer advertising.
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