Online advertising reaches $544.8 mil, new report says

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Technology companies still lead the pack in Internet advertising spending, but non-technology companies are increasing their online ad budgets significantly, according to a report being released today from InterMedia Advertising Solutions, a spinoff of Competitive Media Reporting.

The report, "InterWatch 1997: Trends in Internet Advertising," is InterMedia's first annual report of Internet ad spending since CMR's January acquisition of AdSpend, the online advertising reporting division of Jupiter Communications.


According to the report, based on data collected from 300 Web sites, consumer Internet advertising revenue totaled $544.8 million in 1997, up 147.1% over revenue in 1996. That's significantly lower than the $906.5 million in Internet advertising revenue reported by the Internet Advertising Bureau for 1997.

While the IAB revenue reporting program, administered by Coopers & Lybrand, is based on self-reporting from more than 1,000 sites, online services and directories, and includes all forms of Internet advertising, InterMedia uses "surveillance" reporting, in which it looks at Web sites, reviews advertising, does independent verification with advertisers, then applies a cost-per-thousand impression model to project U.S. revenue.

Also, InterMedia includes only banner advertising, interstitials and sponsorships, and does not include revenue for listings, online directories and space on malls.

"Our primary purpose is to look at relative dollars for categories or brands within a category," said Joe Philport, president of InterMedia.


Microsoft Corp. was the top 1997 spender at $30.9 million, up 136.8% from 1996. IBM Corp. jumped from No. 4 to No. 2 on nearly $18 million in spending, a 209% increase. Excite held on to No. 3 with a 69.2% spending increase, rising to $11.7 million.

InterMedia has broken out the Internet ad-spending data into 38 industry classes, the same as the industry classes that CMR uses to report on spending in traditional media.

It also breaks down the data into 534 industry subclasses and shows how Internet spending compares to overall advertising spending for those industries. On average, online advertising across all the subclasses is 0.74% of all consumer ad spending when compared with traditional media measured by CMR, the report concludes.

Online and Internet services spent 28.1% of their overall ad budgets online; computer and software companies, including online services, spent 11.7%; financial services and telecommunications companies each spent 1.25%, and school camps and seminars spent 1.2%.

Internet advertising continues to be dominated by technology and services, with computers and software (including online and Internet services) contributing $275 million, or 50% of all Internet advertising in 1997. The No. 2 category was financial services, contributing $42 million, or 7.7% percent of Internet advertising. Telecommunications was third, spending $33 million, or 6% of Internet advertising.


However, said Mr. Philport, "The real interest is in the emerging categories," pointing to package goods, such as skincare and diapers, and education, such as universities and seminar producers.

Here are just a few findings from the report:

  • The beverage industry spent $2 million on Internet advertising in '97, up 35% over '96.

  • Beer and wine marketers spent $970,000 on Internet advertising in '97, up 53% over '96.

  • In the skincare subcategory, marketers of creams, lotions and oils spent $500,000 on Internet advertising in '97, up from almost nothing in '96.

  • Diaper companies spent $671,000 on Internet advertising in '97, up from almost zero in '96.

    A full copy of the report is available from InterMedia by e-mailing [email protected].

    Copyright August 1998, Crain Communications Inc.

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