Internet ad sales approach $1 billion

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Online advertising revenue reached $906.5 million in 1997, establishing the Internet as a solid advertising medium, according to an Internet Advertising Bureau report due out April 6.

STILL AT THE BOTTOM OF THE HEAP

Granted, the Internet is still at the bottom of the heap in terms of ad dollars generated, but it's closing in on outdoor advertising revenue, which totaled $1.4 billion last year.

"It's significant that Internet spending is showing up on the radar, and is growing faster than traditional media," said Rich LeFurgy, IAB chairman and senior VP-advertising, ABC News/ESPN Internet Ventures.

Internet advertising revenue totaled $335.5 million for the fourth quarter, up 48% over revenue of $227.1 million for the third quarter, according to the IAB report, prepared by Coopers & Lybrand.

The revenue data were reported by more than 200 companies, representing more than 1,000 Web sites, as well as online services, directories and other online media. In addition, Coopers & Lybrand used outside sources to gather revenue data not reported by known online properties, said Pete Petrusky, director of the new media group at Coopers & Lybrand.

Internet ad revenue for 1997 was up 240% over revenue in 1996. By comparison, ad revenue from broadcast TV grew by only 3% in 1997, newspapers by 7.3% and cable TV by 15.5%, the study reported. Magazine ad revenue grew by 10.7% between 1996 and 1997, according to the report, which used agency McCann-Erickson Worldwide as a source for some data.

$4.3 BILLION BY 2000

However, while the argument can be made that the Internet is experiencing such phenomenal growth because it's a new medium, Mr. LeFurgy points to comparative growth for traditional media in their third year of existence. Compared with the Internet's 240% leap over last year, broadcast TV advertising revenue grew by only 188% in its third year of existence, while cable TV ad revenue grew by 120% in its third year, he said.

"The Internet is becoming a mass medium in a fraction of the time it took all other media," said Peter Storck, group director of online advertising at Jupiter Communications.

Jupiter predicts Internet ad revenue will reach $1.9 billion in 1998, growing to $3 billion in 1999, and $4.3 billion in 2000.

While Internet ad spending is still dominated by high-tech companies (computer product advertisers were the biggest fourth-quarter Internet spenders), traditional advertisers are catching up (consumer-related advertisers were No. 2 in the fourth quarter).

"We're beginning to see some serious interest [in the Internet] from some of our traditional clients," said Lynn Bolger, senior VP-Web media director at Ammirati Puris Lintas, New York. Clients include Compaq Computer Corp., UPS and Ameritech.

SHOWING A RETURN ON INVESTMENT

For traditional clients, the key to Internet spending is showing a return on investment, which is best accomplished by sales generated over the Web, she added.

And 1998 is the year that's expected to happen, said Mr. LeFurgy. Electronic commerce, direct marketing and relationship building will fund new growth.

"While the Internet is at the bottom of the ladder, it won't be there for long," he said.

Copyright April 1998, Crain Communications Inc.

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