Online Ads Show Signs of Pickup

Signs of life are returning to the Internet-ad business after the harshest year since 2002, with a new report on Wednesday showing that U.S. online-ad spending started to pick up again during the second half of 2009.
U.S. online-ad spending reached $6.3 billion during the fourth quarter of 2009—the largest quarter on record for Internet advertising, according to a report released by PricewaterhouseCoopers and the Interactive Advertising Bureau, a trade group of media and technology companies. Spending during the fourth quarter increased 2.6% from the same period in 2008.
“The worst of the economic impact on Internet advertising is over and the seeds of growth have been planted,” said David Silverman, partner at PricewaterhouseCoopers.
Fourth-quarter growth in 2009 capped a bleak year in the digital-media business, where total online-ad spending dropped 3.4% to $22.7 billion, according to the report. That yearly decline marked the first drop in the online-ad market since 2002, when online-ad spending fell 16% following the burst of the dot-com bubble.
Some online-ad formats fared better than others. Search remains the largest online-ad format and continues to take share of the U.S. online-ad market, making up 47 % of 2009 ad revenue, up from 45% in 2008. Search-ad spending increased 1% in 2009 to $10.7 billion compared with 2008.
Spending on display ads, the graphical ads that border Web sites, increased 4% to $8 billion in 2009. Spending on online video grew 38% in 2009 to $1 billion.
But some ad formats experienced sharp declines. Ad spending on classifieds dropped 29% in 2009 to $2.3 billion. Ad spending on lead generation dropped 14% to $1.5 billion, and email-ad revenue dropped 28% to $292 million.
Compared with the broader media business, the Internet escaped the economic downturn relatively unscathed. Total ad spending declined 12.3% in 2009 to $125.3 billion compared to 2008,, according to WPP‘s ad-tracker Kantar Media.
Several forecasters predict that online ad spending will experience double-digit growth this year and continue to take share from traditional media, like print and TV. Online ad spending will grow 5.5% this year to $23.6 billion, according to research firm eMarketer.
While online advertising is a growing piece of the total advertising business, several impediments remain before the amount of dollars marketers spend online matches the amount of time consumers spend on the Internet, industry experts say. Internet advertising lacks strong measurement standards and remains too complicated to buy, says Terence Kawaja, managing director of investment bank GCA Savvian Advisors. “What is needed in the interactive industry is some revolutionary thinking,” Mr. Kawaja says.
Write to Emily Steel at emily.steel@wsj.com

Wall Street Journal 

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