IAB: Internet advertising will near $2 bil for 1998

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Continuing toprove itself as a medium, Internet advertising revenue topped $1.3 billion for the first nine months of 1998, and is expected to reach $2 billion for the year.

Online ad revenue for the third quarter was $491 million, more than double revenue for the same period in 1997, according to the Internet Advertising Bureau Revenue Report, conducted by the new-media group of PriceWaterhouse-Coopers.

"I'm surprised at how strong [revenue is] in this seasonal quarter," said Rich LeFurgy, chairman of the IAB, pointing to a traditionally sluggish third quarter.

"It indicates consumer marketing companies are taking the medium seriously," he said.

$2 BIL `PHENOMENAL'

Pete Petrusky, director of new media for PriceWaterhouseCoopers, said fourth-quarter revenue is expected to reach between $650 million and $700 million, based on typical spending patterns. That would bring total online ad spending close to $2 billion for the year.

"It's a phenomenal achievement considering how new the medium is," Mr. LeFurgy added.

In a report to be released today, Competitive Media Reporting's InterMedia Advertising Solutions said Web-only advertising on 300 content sites reached $248 million in the third quarter, up 76.5% over Web revenue for the year-earlier period. Web ad revenue for the first nine months totalled $675 million, up 84.5% over the first nine months of 1997.

TOP SITES VS. ALL-ONLINE SPENDING

While InterMedia's numbers reflect only Web advertising on top content sites, the IAB's numbers include advertising on online services such as Prodigy and America Online, digital media such as PointCast, e-mail and classifieds.

"To me, the most interesting thing is the growth of the direct marketing, retail and services entities," said Joe Philport, president of InterMedia, pointing to increased ad spending by financial services, the second-largest category spender following computers, and software.

The top Internet advertiser for the first nine months of 1998, according to InterMedia, was Microsoft Corp. ($25.5 million), followed by IBM Corp. ($21 million), Excite ($8.8 million), General Motors Corp. ($8.2 million) and Infoseek Corp. ($7 million).

The auto industry, which ranked sixth as an Internet category spender, is strongly represented on InterMedia's list of Top 25 advertisers for the first nine months of the year, including American Honda Motor Co. (No. 17 with $4.1 million) and Toyota Motor Sales USA (No. 22 with $3.7 million).

"For these top advertisers and industry classes, the Internet has clearly become a key part of those industries' overall marketing strategy," said Mr. Philport.

In the IAB report, consumer-related ad spending (27% of total online spending), edged out computer-related spending (24%), followed by financial services (16%), telecom (11%) and new media (7%) for the third quarter.

BANNERS NO. 1

In other IAB findings, banner ads continued as the predominant type of advertising (53%), followed by sponsorships (30%), interstitials (6%) and other forms (11%), such as rich-media ads.

And, reflecting the growth of electronic commerce, hybrid deals involving an up-front payment to the Web site and a performance payment, such as transaction revenue sharing, accounted for 52% of revenue fees. Cost per thousand-only deals accounted for 43% of total Internet ad deals, while performance-based deals accounted for only 5%.

Copyright February 1999, Crain Communications Inc.

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