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First-quarter Web ad sales hit $2.8 billion

As TV audience fragments, advertisers look for cheaper alternatives such as search-engine marketing via Google, Yahoo.

Web ad sales were at their height in the first three months of 2005, after two years of steady growth in online advertising following the dot-com fallout.

Online-ad revenue totaled $2.8 billion in the first quarter, a 26 percent boost from the same period in 2004, according to a study by the Interactive Advertising Bureau, or IAB, and auditor PricewaterhouseCoopers. Consecutively, first-quarter sales were up 4.3 percent from $2.7 billion in the fourth quarter of 2004.

Researchers attributed the sales rise to a broader online audience and more households connecting to the Net via broadband. High-speed connections let marketers deliver rich, brand advertising to a mass market that was once only targeted via television. But as the TV audience fragments with the advent of hundreds of cable and satellite channels, marketers are looking for cheaper ways to target customers, such as search-engine marketing via Google and Yahoo.

"The economics (online) are too compelling for marketers to ignore," Tom Hyland, new media group chair at PricewaterhouseCoopers, said in a statement.

The figures come as several researchers have predicted a banner year for online advertising. Forrester Research has forecast that sales will grow by 23 percent to $14.7 billion in 2005, based partly on marketers allotting nearly 25 percent more of their budgets to interactive advertising this year. Investment bank Goldman Sachs recently increased its estimates, saying that interactive ad sales will rise 28 percent to $12.3 billion and make up 4.4 percent of total advertising revenue.

The IAB reported Web ad sales of $9.6 billion for the full year in 2004, up 33 percent from 2003 revenue. Last year's sales exceeded the previous revenue record in 2000 by nearly 20 percent.

The IAB sponsors the Internet Advertising Revenue Report, which is conducted independently by the New Media Group of PricewaterhouseCoopers. First-quarter estimates represent data from all companies that report meaningful online advertising revenue.