Tuesday, October 3, 2000

Increase Over Q1 Shows Continued Advertiser Confidence as Traditional Advertisers Add to Online Presence

First Half of 2000 Approaches Full Year 1999 Run Rate In The $8 - 10 Billion Range

New York, NY - October 3, 2000 - Recording its eighteenth consecutive quarter of positive growth in the United States, the Internet advertising industry broke the 2 billion dollar mark in the second quarter of 2000, amassing $2.1 billion in revenue. Additionally, the $4.1 billion total for the first half of the year is approaching 1999's full year total of $4.6 billion, with a run rate in the $8 - 10 billion range. The Internet Advertising Bureau's (IAB) Internet Ad Revenue Report, conducted independently by PricewaterhouseCoopers also reported that revenues for the second quarter grew 8.8 per cent, or $171 million over the first quarter of 2000, and 127.3 percent or $1.2 billion over the comparative second quarter of 1999.

The IAB/PricewaterhouseCoopers Internet Ad Revenue Report is the industry's only historical look at the actual growth of the Internet advertising industry, spanning over four years of reporting. The report pointedly does not predict future results, but rather uses data compiled directly from information supplied by companies selling advertising on the Internet, allowing member companies to create their online media plans in a reality-based environment.

"While the online advertising industry may be taking a breather from its explosive growth over the past several years, a $2 billion quarter signals the continued health of the Internet as it evolves into history's most robust medium for advertisers and marketers," said Rich LeFurgy, IAB Chairman and General Partner in WaldenVC. "Far from being broken, the industry is seeing very sizable increases in online advertising from large traditional advertisers. Importantly, the 'throw it up against the wall to see what sticks' test-type efforts are gone, as the ad community now knows that the Internet is a market-share driver, and the marketplace now understands that this is a brand building and direct marketing medium."

According to the report, the categories which lead online spending during the second quarter were consumer-related (30%), computing (17%), financial services (15 %), business services (10 %), and media (9%). The report also found that the overwhelming number of revenue transactions (95 %) continue to be cash-based with barter/trade and packaged deals accounting for 5 % of total revenues. Banner advertisements continue to be reported as the predominate type of advertising, accounting for 50 % for Q2, sponsorships at 27 %, classified ads accounted for 7 %, referrals were 4 %, interstitials at 3 %, email at 2 %, rich media 2 % and keyword searches 1 %.
Pricing models for Internet advertising remained fairly constant in the second quarter with hybrid deals accounting for 46%, CPMs or impression-based deals at 44 % and performance-based deals at 10%.
"In the long term, the robust nature of the Internet will continue to lead the world economy, but there will be some bumps in the road, as we have seen in virtually every advertising medium as it grows in importance," noted Tom Hyland, Chair, PricewaterhouseCoopers New Media Group. "A significant finding of this report is that online advertising continued to increase in the midst of a turbulent phase of the medium's growth, and that advertising became more concentrated in the higher profile sites and portals, signaling that the smart money is going where the traffic is. The first half of 2000 has accounted for almost the full year 1999 revenues, and a run rate in the $8 -10 billion range. The historical fourth quarter bump in ad revenue, combined with the 'use it or lose it' budgets, we look for 2000 to be a very good year for the industry."

Conducted by the New Media Group of PricewaterhouseCoopers on an ongoing basis, with results released quarterly, the "Advertising Revenue Report" was started by the IAB in 1996, and represents data from more than 200 companies representing thousands of sites. The results reported are the most accurate measurement of online advertising revenues since the data is compiled directly from information supplied by companies selling advertising on the Internet. All-encompassing in nature, the survey includes data concerning online advertising revenues from Web sites, commercial online services, free e-mail providers, and all other companies selling online advertising.

PricewaterhouseCoopers (www.pwcglobal.com), the world's largest professional services organization, helps its clients build value, manage risk and improve their performance. The PricewaterhouseCoopers New Media Group -- with offices in New York, Los Angeles, Seattle, San Francisco Bay Area, and Boston -- combines content and technology specialists to provide comprehensive service to dynamic entrepreneurial companies. Services include management consulting, business assurance services, ad delivery and privacy attestation and consultation, assistance with mergers and acquisitions, tax planning and compliance, capital structuring and employee benefits and executive compensation packages.

Drawing on the talents of more than 150,000 people in 150 countries, PricewaterhouseCoopers provides a full range of business advisory services to leading global, national and local companies and to public institutions. These services include audit, accounting and tax advice; management, information technology, strategic and human resource consulting; financial advisory services including mergers & acquisitions, business recovery, project finance and litigation support; business process outsourcing services; and legal services through a global network of affiliated law firms.

Founded in 1996, the IAB is the leading online advertising association with over 300 active members. Its activities include evaluating and recommending standards and practices, fielding research to document the effectiveness of the online medium and educating the advertising industry about the use of online advertising. Current membership includes companies that are actively engaged in the sales of Internet advertising, with associate membership including companies that support advertising, -- interactive advertising agencies, measurement companies, research suppliers, technology suppliers, traffic companies and other organizations from related industries. A global organization, the IAB has member countries including Canada, Belgium, France, Germany, Holland, Hong Kong, Italy, Switzerland and the United Kingdom, and is currently developing membership countries in Asia and Latin America, as well as other countries in Europe. The IAB and the Internet Local Advertising & Commerce Association (ILAC) agreed to combine their organizations in July of 1998.


Marla Nitke IAB
[email protected]