Advertising revenues totaled $1.79 billion in the third quarter, off 4.1 percent from $1.87 billion in the previous quarter, according to industry trade group the Interactive Advertising Bureau (IAB). The decline is the industry's third straight dip in quarterly sales.
The IAB's quarterly report, the Internet Ad Revenue Report, is conducted independently by PricewaterhouseCoopers' New Media Group.
The shortfall in online advertising shows the effects of a technology sector slump and U.S. recession, which has caused widespread malaise in the traditional advertising industry. The year-over-year drop-off in the Internet sector is the industry's first after years of double and triple-digit growth, brought on by lavish spending during the dot-com boom.
"There is no more gravy train, but the slight decline in this quarter's revenues bodes well for the industry in a fluid market," Tom Hyland, chairman of PricewaterhouseCoopers New Media Group, said in a statement. "It appears that traditional advertisers are devoting a greater percentage of their budgets to online advertising, shifting budgets to mirror the shifting consumption of online media by their customers."
Industry forecaster Zenith Optimedia expects a 6 percent drop, adjusted for inflation, in total U.S. spending in 2001, the London-based company told the UBS Warburg media conference in New York this week. Next year, spending will likely fall 1.5 percent, the company said. Meanwhile, Universal McCann forecaster Robert Coen expects a 2.5 percent rise in U.S. ad sales next year after a 3.9 percent shortfall this year.
In the U.S. online market, classified ads remain the strongest growing format, accounting for 17 percent of revenue for the quarter, according to the IAB's report. In addition, banners remained the dominant format, accounting for one third of online sales.