Net ad revenue high, but slowing

Internet ad revenues for 1997's first nine months topped $500 million, but the rate of increase slowed dramatically, a new study says.

2 min read
Internet ad revenues for 1997's first nine months topped $500 million, but the rate of increase slowed dramatically as online publishers experienced their first seasonal slowdown in advertising.

Spending by consumer advertisers remained the top category, however--an indication that mainstream marketers are seeing the Net as a viable medium.

"This is acting more like a traditional medium where there is a seasonality in the summer months," said Rich LeFurgy, chairman of the trade group Internet Advertising Bureau (IAB), which released the figures. Last July's Olympics helped maintain ad spending in last year's summer quarter, he suggested.

Internet ad revenues for July, August, and September increased just 6 percent over the second quarter's spending, reaching $227.1 million, which was triple the spending in the same 1996 quarter.

For the first nine months of 1997, ad revenues reached $571 million, up 263 percent from the same 1996 period, according to the IAB's report.

As in 1997's second quarter, consumer advertisers were the strongest segment, accounting for 32 percent of spending. Computer products, which have been the mainstay of Net advertising, made up 22 percent of ad revenues over the summer, while financial services represented 20 percent, new media 7 percent, and telecommunications 6 percent.

"Consumer advertising is being fueled by more transaction-related advertisers, retailers, and direct marketers," LeFurgy said. "That could be the leading edge of the wave of e-commerce spending that we're expecting in the next 12 to 18 months."

The third-quarter pause in growth suggests calendar-year spending will approach $1 billion but not exceed it, LeFurgy said.

This study is the first in which the IAB has broken out advertising by type of publisher. Search engines grabbed 55 percent of ad dollars in the quarter, while technology sites snared 21 percent of revenue, news and information 8 percent, sports 5 percent, and entertainment 3 percent.

Looking ahead to the end of the current quarter, the survey said that 70 percent of inventory in the 200-plus larger Web sites had been sold out by mid-November. Also, 74 percent of respondents predicted higher ad rates in the next year, with just 6 percent forecasting a decline. Twenty percent think rates will stay flat.

The IAB numbers are based on figures submitted by Web publishers, consumer online services, and ad-supported email firms. The data, from more than 200 Internet publishers representing an estimated 90 percent of ad revenues, is collected anonymously and compiled by accounting firm Coopers & Lybrand.

At today's IAB membership meeting in New York, the organization also chartered IAB Canada and IAB Germany as country members. LeFurgy said Japan, Sweden, France, and the United Kingdom have expressed interest. The 18-month-old group also is conducting a search for an administrative director, its first paid staff.