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Net ads top $351 million in quarter

Online advertising in the first quarter of 1998 is up just 5 percent from 1997's last quarter, according to Internet Advertising Bureau figures.

Online advertising in the first three months of 1998 totaled $351.3 million, up just 5 percent from 1997's last quarter, according to figures released today by the Internet Advertising Bureau.

The trade group said the relatively slow growth rate was anticipated because ad spending in all media is generally stronger in the fourth quarter than the first.

"The increased seasonality of the numbers reflects growing acceptance of online advertising by traditional advertisers," said Pete Petrusky of Coopers & Lybrand, the accounting firm that collects the numbers for the IAB. "The industry did not expect a major increase but [expected] lulls in the first and third quarters of the year."

The latest quarter was the eighth consecutive quarter of growth according to the IAB survey, and revenue was up 271 percent from 1997's first quarter. The $351 million figure puts the industry on track to exceed $1 billion in ad revenues in 1998, and sites participating in the survey said they expect revenues to reach $1.5 billion.

The only new element in the quarterly figures was a trend toward revenue sharing from online sales, although 84 percent of revenues are still based on the number of ad banners viewed or clicked.

"E-commerce is starting to have an effect on pricing," said IAB chairman Rich LeFurgy, senior vice president of advertising at Buena Vista Internet Group, Disney's online arm. "Now publishers have a new revenue source."

Computer advertising accounted for 27 percent of revenues, followed by consumer ads at 25 percent, telecommunications at 14 percent, financial services at 13 percent, and new media at 10 percent.

Within the consumer sector, retail ads accounted for 35 percent of revenue; automotive, 17 percent; mail order, 11 percent; travel, 9 percent; toys and games, 8 percent; food, 4 percent; and amusement, 4 percent.

Ad banners continued to dominate spending, accounting for 55 percent, down from 59 percent in the previous quarter. Sponsorships, which frequently include ad banners as a component, made up 40 percent of revenue, with 4 percent for interstitials (ads that pop up while pages are downloading) and 1 percent for other ad types.

"Banners are the preferred way that people are advertising. They are here to stay, but they will be supplemented by other options," LeFurgy said.

Major Web sites continue to grab the lion's share of ad revenue, with the top ten sites getting 64 percent of revenues. However, the IAB figures also showed some evidence that smaller sites are picking up a bigger piece of the ad market.

Barter deals, in which Web sites trade ads without charging each other, accounted for just 2 percent of spending.

The survey, considered the most reliable measure of online advertising, represents data from more than 200 publishers and 1,100 sites. It includes ad revenues for online services and free email companies.

In other IAB news at its San Francisco meeting today:

  • The trade group is focusing on audience measurement, a key point for ad buyers, with a meeting tomorrow involving measurement firms, ad agencies, and Net publishers.

  • The IAB said it will absorb a smaller trade group, the Internet Local Advertising & Commerce Association, a 50-member group that promotes city-based sites.

  • The IAB named Intel the recipient of the group's first marketer-of-the-year award for its use of the Internet as an effective marketing tool. (Intel is an investor in CNET: The Computer Network, publisher of NEWS.COM.)