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HolidayBuyer's Guide
Tech Industry

Internet ad revenue climbs 26 percent

Spending was led by ads linked to Web search results. Other strong segments: banner ads and classified listings.

As of June, advertisers had spent $5.8 billion to place ads online this year, a 26 percent increase compared with the first six months of 2004, according to a new report.

This record spending was once again led by ads linked to Web search results, said the Interactive Advertising Bureau, or IAB, which released the report Monday in conjunction with PricewaterhouseCoopers. Spending on search-related ads reached $2.3 billion, a 27 percent increase compared with the same period last year, the report said.

Overall, search ads accounted for 40 percent of Internet ad sales, in line with last year, the group said. Banner ads and classified listings were the next-biggest ad categories, attracting 20 percent and 18 percent of the spending, respectively.

"The consistent growth in overall revenues shows marketers may be shifting more of their total advertising budgets to online," David Silverman, a partner at PwC, said in a statement. "This is a natural development, as research shows more consumers are spending a larger percentage of their media time online."

Advertisers spent nearly $3 billion online in the second quarter alone, a 26 percent increase over the same period last year, IAB noted.

Online ads that incorporate streaming video or audio accounted for just 8 percent of online ad revenue in the first half of the year but are among the fastest-growing segments. Spending on these "rich media" ads grew 26 percent, the report noted.

The only category that contracted was online sponsorships, in which an advertiser sponsors an entire site, online event or e-mail message. Sponsorships now make up just 5 percent of online ad sales, down from 9 percent in the same period last year.