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Tech Industry

Net ads ring up rising sales

Online ad revenue rises more than 40 percent in the second quarter, propelled by skyrocketing paid-search sales.

Sales from online advertising hit $4.6 billion in the first half of 2004, up more than 40 percent from the same period the previous year, according to a new U.S. study.

And in the second quarter, online ad sales reached $2.37 billion, up 42.7 percent compared with the same quarter in 2003, the Interactive Advertising Bureau (IAB) and auditor PricewaterhouseCoopers said in the report, released Monday.

The biggest winner was paid search, or ads linked to search results in Google, Yahoo, MSN and other portals, which saw revenue of $947 million in the quarter, up 97 percent from $481 million in the same period of 2003. In addition, search ads made up 40 percent of all second-quarter sales, the report said.

The increases mark the industry's seventh consecutive quarter of positive results, coming after a dramatic decline during the dot-com bust. Before mid-2000, online advertising sales ballooned, with between double-digit and triple-digit percentage growth each year. That growth was fueled by exuberant hopes that the online market would revolutionize traditional advertising, making it possible for marketers to track individuals and create a one-to-one relationship with their customers. But those hopes fizzled when the stock bubble burst in 2000; and the industry has since had to re-establish online advertising as a viable business.

"Internet advertising is without question taking share from the other media at this time and for good reason--marketers have figured out that online advertising is often the most cost-effective medium for influencing both branding and sales results," Greg Stuart, president of the IAB, said in a statement.

Stuart said sales are skyrocketing because major brand advertisers are beginning to invest more of their marketing budgets online. For example, Ford's Lincoln Mercury unit is devoting 25 percent of its ad budget online, and Vonage is earmarking 50 percent of its budget for Web ads, Stuart said.

Online ad sales rose 6 percent in the second quarter over the first quarter, which listed revenue of $2.23 billion, revised from earlier estimates of $2.27 billion.

Paid search was not the only segment to take off in the second quarter. Display advertising hit $474 million, compared with $382 million. Rich media ad sales rose to $189 million from $149 million.

"For the first time in a number of years, we see a 25 percent growth rate collectively in rich media and display advertising," Pete Petrusky, director of new media at PricewaterhouseCoopers, said in a statement.