Internet-Ad Revenue Reached $21.2 Billion in 2007

Internet-Ad Revenue Reached $21.2 Billion in 2007
26% Growth Rate Puts It Ahead of Radio, Cable

By Abbey Klaassen

Published: May 15, 2008
NEW YORK (AdAge.com) -- Internet-ad revenue notched $21.2 billion in 2007, an annual growth rate of 26%, according to the Internet Advertising Bureau and PriceWaterhouseCoopers in their annual report of ad spending.

That was good enough for the medium to top radio, which was expected, but the figure also puts internet ahead of cable's $20.9 billion take.

"We've learned not to be surprised by the vitality and vibrancy of internet advertising," said David Doty, senior VP-thought leadership and marketing at the IAB. He said in first-quarter 2007 internet ad spending was $4.9 billion; by the fourth quarter it was $5.9 billion. "A billion here and billion there adds up."

Big players responsible
Internet-ad spending remained fairly concentrated among the large players, with the top 10 properties (think Google, Yahoo, Microsoft, AOL, IAC, News Corp.) accounting for 69% of all online ad spending, the top 25 accounting for 80% and the top 50 accounting for 89%. Search advertising was the largest category bought by marketers, with 41% of total ad spending, up from 40% the year prior. Display was 34%, up from 32% the year prior.

Video commands a larger share of mind in the industry than it does a share of ad dollars: It accounted for only 2% of total online ad spending. Rich media went down slightly, although that is likely because video used to be counted as rich media, but was broken out into its own category in 2007. The IAB doesn't break out spending on social media sites such as Facebook or MySpace, but said it revisits the categories it tracks every year.

Retail remained the strongest consumer online ad category, with 45% of consumer online ad revenue, followed by automotive (21%), leisure (13%), entertainment (9%) and packaged goods (8%).

Performance-based up

Also interesting was that performance-based ad buys accounted for 51% of all online ad spending, up from 47% the year prior. The share of online ad spending that made up cost-per-thousand-based buys was down from 48% to 45%, and hybrid pricing-models (a combination of performance-based and CPM pricing) were down from 5% to 4%.

While that trend might seem counterintuitive at a time when more brand marketers -- who traditionally have employed CPM-based buys -- are coming online in bigger ways, Mr. Doty warned against reading too much into it. "It's an expected variable," he said.