Wednesday, December 20, 2000
INTERNET ADVERTISING BUREAU (IAB) REPORTS ONLINE ADVERTISING SOFTENS IN THIRD QUARTER 2000

Revenues up 63% over 3Q 1999, declines 6.5% over Q2 2000

New York, NY - December 20, 2000 - Internet Advertising revenues for the third quarter of 2000 increased 63 per cent over the comparative quarter for 1999, and showed a slight decline of six and a half per cent when compared to the second quarter of 2000, according to the Internet Advertising Bureau's (IAB) Internet Ad Revenue Report which is conducted independently by the New Media Group of PricewaterhouseCoopers. Third quarter 2000 revenues grew to $1,986 million (63.2 %) over the same period in 1999, and showed a decline of $ 138 million (6.5%) when compared to the second quarter of 2000. Year-to-date online advertising revenues for 2000 now stand at $6.1 billion with a continuing run rate of between $8 and $9 billion for the year. The report covers Internet ad revenue for the United States.

"This slight decline in online ad revenue should come as no surprise to the industry. The slowdown which we are seeing this quarter has its roots in a number of factors which affect the medium. The pull-back of advertising by many companies in the dot.com sector, combined with the traditionally weak third quarter, and the transition of the advertisers' focus on how to best take advantage of the Internet, all have contributed to the third quarter slowdown,: said Rich LeFurgy, Chairman of the IAB and General Partner of WaldenVC. "There is no doubt that traditional advertisers are increasing their online spending, as the $6 billion year-to-date attests. With publishers offering a variety of new and innovative ad formats these advertisers are now transitioning their objectives. Increasingly aware of the power of the medium for branding and direct marketing, these savvy advertisers are no longer looking for the most traffic, rather, they are seeking different ways and new creative formats which publishers are offering, to build their brands. This is an industry of innovation, and the serious players are in it for the long haul."

Commenting on the report, Tom Hyland, Chair, PricewaterhouseCoopers New Media Group noted: "Because of the robust nature of this medium, we have become accustomed to continued, unfettered growth. We believe that it is important to note that in a comparatively weaker advertising market, Internet ad revenues still totaled nearly $2 billion for the quarter. This is still the fastest growing medium ever, subject to the vagaries of the marketplace, but still recognized by advertisers, both small and large, as the place they have to be to insure success."

The categories which lead online spending during the third quarter were: Consumer-related (30%), Computing (18%), Financial Services (14%), Business Services (10%), and Media (11%). The report also found that the vast majority of revenue transactions, (92%) continue to be cash-based with barter/trade and packaged deals accounting for 7% and 1% of total revenues respectively.

Innovation in Internet advertising formats and models has seen some changes in the overall share, notably banners, while still the predominate format, account for 46% of the third quarter's online ads, with sponsorships (28%), classifieds (9%), referrals (6%), interstitials (4%), email (2%), rich media (2%), keyword searches (2%), and other (2%).

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 over 1500 Web 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, IAB member countries include Belgium, Canada, France, Germany, Holland, 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.

Other procedures to assure data quality may include use of reliable sources and collection methods, reasonable and appropriate consumer access and correction, and protections against accidental or unauthorized alteration.

Contact:

Marla Nitke IAB
212-380-4714
[email protected]