IAB: Ad revenue online projected to hit $2 bil in '98

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Internet advertising for the first half of 1998 has more than doubled over the same period last year and, if it keeps up at this rate, could reach $2 billion for the year.

Those were the findings from the Internet Advertising Bureau's second-quarter revenue report, administered by Price Waterhouse Coopers and released last week at the @dtech conference in New York.

In the second quarter, Internet advertising revenue was $422.7 million, almost double the $214.4 million for the second quarter of 1997. For the first half of this year, revenue reached $774 million, up 125% from $343.9 million for the first half of '97.

$907 MIL TOTAL IN `97

"Revenue for the full year could approach $2 billion," said Tom Hyland, chairman of Price Waterhouse Coopers New Media Group. In 1997, total Internet advertising was $906.5 million.

Spending for '98 is on track with leading industry research data. Jupiter Communications expects Internet revenue to reach $1.9 billion this year, said Evan Neufeld, senior analyst-online advertising.

"The fourth quarter is the biggest quarter of all," said Mr. Neufeld, noting that's where the largest jump is likely to be seen.

"The buys are getting more diverse and [advertisers] are striking bigger, longer-term deals," he added, pointing to the $90 million advertising deal struck last week between Microsoft Corp. and First USA that would give the bank exclusive rights to market its credit cards on the MSN network.

According to the IAB study, 56% of deals are hybrid, involving impressions delivered and some performance measurement, such as click-through or cost-per-sale. Forty-percent are straight cost-per-thousand or sponsorship deals, while only 4% are strictly performance-based. And 95% of the deals are straight cash.

COST-PER-CLICK USE

"Second-tier sites are doing more barter and cost-per-click," said Rich LeFurgy, chairman of the IAB. "They're not in the mainstream."

SEASONALITY SHOWING

Also noteworthy is the seasonality in Internet advertising, which signals the medium is becoming more like traditional media. The second and fourth quarters continue to show strength, while the first and third quarters are slower, said Mr. Hyland.

Regarding ad models, 58% of second-quarter revenue came from banner ads, 37% from sponsorships, 3% from interstitials and the rest from other formats.

Computers and related products were the top ad-spending category at 26%, followed by consumer advertising (24%), financial services (13%), new media (13%) and telecommunications (9%).

In the consumer category, retail spending contributed 33% of the spending, up from 28% in the second quarter of last year. Other big spenders were automotive (19% of consumer spending), mail order (10%), toys and games (9%) and travel (8%).

Copyright October 1998, Crain Communications Inc.

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