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Online-ad industry grows up

Web-advertising leaders back new measurement standards for online ads as the industry reports record sales.

Web-advertising leaders are backing new measurement standards for online ads as the industry reports record sales.

Major online publishers and industry organizations said Monday that they've approved standards for counting online-advertising impressions, clearing a major hurdle to mainstream adoption of the medium after almost 10 years.

The move should go a long way to promote ongoing growth in ad sales by simplifying the buying and selling process, according the Interactive Advertising Bureau, a trade group that championed the standards.

On Monday, the IAB reported the industry's eighth consecutive quarter of ad sales growth. Web-ad sales totaled about $2.43 billion in the third quarter, a 35.3 percent lift from the comparable period of 2003 and a 2.4 percent rise over the second quarter. Search-related advertising boosted the industry's upward trend, bolstering revenues of companies such as Google and Yahoo.

After years of doldrums, the Web-ad industry has finally returned to consistent growth. Online-ad revenue for the first nine months of the year was an estimated $7 billion, compared with $7.3 billion reported for all of 2003, according to IAB's half-year survey, which was conducted by PricewaterhouseCoopers. If the trend continues, 2004 could end up surpassing the previous record high of $8 billion in revenue reported in 2000.

"Single-digit, sequential growth demonstrates the industry has left behind the large revenue spikes that characterized the early years," Tom Hyland, head of the new media group at PricewaterhouseCoopers, said in a statement. "We're now looking at a maturing, stable industry that inspires further investment by large, traditional marketers."

One of the major steps on the road to maturity has been to establish guidelines for counting online ads--and gain widespread industry participation. The issue has been on the table for years and has inspired heated arguments between publishers and advertising agencies. Each side has wanted to maintain control over the way ad numbers are counted because it directly affects billing and revenue.

Publishers often count an ad impression when a line of code requesting the advertisement from a third-party ad server is sent with the delivered Web page. For a number of reasons, a requested line of code may not be displayed on a computer screen. Advertisers, or their third-party ad networks, often count the impression only when the image itself is delivered.

The new ad-measurement standards require that online publishers and advertisers count an "impression" or ad when it reaches the Web page, as opposed to counting it when it leaves the ad server--a rule favorable to advertisers and their agencies. The standard also clears up inconsistencies in counting practices--for example, agencies that count ads based on server logs even if the Web page didn't load the impression.

Additionally, the new standards stipulate that Web publishers filter out advertising traffic resulting from "spiders," or bots that crawl the Web and register impressions.

"This cements the medium's position as the most accountable medium and removes some of the friction of the business," said Brian Monahan, an interactive-media director at advertising agency Universal-McCann, who threw in a word of caution.

"It still doesn't resolve the questions about online advertising's strength as a branding medium," he said.

Several top industry organizations, including the Advertising Research Foundation, the American Association of Advertising Agencies and ESOMAR (formerly the European Society for Opinion and Marketing Research) adopted the international standards. Web publishers including Yahoo and CNET, publisher of News.com, also have backed the guidelines.

The IAB said it expects broad adoption of the guidelines in the United States by the end of 2005. The collective group also recommended that the U.S. market impose third-party independent auditing and certification guidelines for all ad-serving applications used in the buying and selling process.

"In just 10 short years we rocketed forward by offering marketers a whole new experience for measuring ad campaigns. This initiative improves on that opportunity by delivering not just a uniform measurement standard, but one that travels across borders," said IAB chief Greg Stuart.

The revenue figure estimate is based on aggregation of data from 15 top online-ad sellers; the actual figure will be reported next spring.