Report: Ad spending up 150%

Spending on Internet advertising reached $597.1 million last year, a gain of 152.6 percent from 1996, according to a report to be released tomorrow by industry researcher Cowles/Simba.

Search engines snared the top four spots in Simba's survey, with Yahoo (YHOO) pulling down an estimated $53.2 million in ad revenues, followed by Excite (XCIT) at $40.2 million.

"This is a contradictory market. It's showing great potential but the fact remains that the industry is dominated by handful of sites that are dependent on a handful of advertisers," said Matt Kinsman, the analyst who compiled the figures. "The market needs to see a broader distribution of dollars for companies to stay committed after satisfying their curiosity online."

Excite, which continues to be bolstered by its acquisition of WebCrawler, moved well ahead of Infoseek(SEEK), which has had management problems. In 1996, Excite and Infoseek were dead even.

Lycos (LCOS) was fourth with an estimated $25.5 million in ad revenues.

"Although people are talking about wanting better targeting of advertising [on the Net], advertisers are still going for volume," said Karen Burka, Simba editorial director. "Everybody is still stuck in traditional media paradigms."

Historically, Simba has reported the most conservative estimates among analysts who follow Internet advertising. Meanwhile, the Internet Advertising Bureau has projected 1997 figures close to $1 billion--nearly double the level estimated by Simba--but its study won't be available until at least next month.

Simba's figures, however, do not include ads on AOL, Pointcast, or the Juno free email service. Simba concentrates on the 18 largest sites, makes estimates, and then projects that to the broader market.

Web advertising increase grew steadily last year: Ad revenues were $84 million for the first quarter, $133.3 million for the second quarter, $169.8 million for the third, and $210 million for the fourth, Simba reported.

Among the 18 largest Web publishers, CNN experienced the biggest revenue jump. It rose to $14.6 million last year from $3.5 million in 1996. Time Warner's Pathfinder site had the flattest growth but still climbed 60 percent to an estimated $10 million.

Bartering or swapping advertising among sites, in which no cash changes hands, continues to influence Web advertising, though Simba does not quantify any estimate for the practice.