Online Advertising Grows 33% in ’04 - And Growing

Online advertising has long come of age, but after the fall in 2000 spending declined. Last year, however, the figures rebounded handsomely with advertisers in the U.S. spending $9.6 billion – 20 percent higher than the previous revenue record set in 2000.

According to figures just released by The Internet Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) fourth quarter revenues alone totaled $2.69 billion, making it the highest quarter ever reported.

And industry analysts are projecting a strong future for the medium. “Interactive Advertising has clearly become a mainstream medium and one that can no longer be ignored as a critical piece of any marketing mix," says Greg Stuart, CEO of the IAB. "The PwC 2004 reported figures indicate that Interactive is firing on all cylinders including display, search and classifieds and is squarely on track to surpass consumer magazine revenues.”

eMarketer, an online research data and analysis aggregator, predicts that online advertising will rise by nearly 34 percent in 2005 to about $13 billion. eMarketer earlier had estimated that 2004 ad revenue would come in at $9.5 billion.

“The reported results from Yahoo and Google showed that I was being a little too conservative about the Web search advertising those companies have popularized,” says eMarketer Senior Analyst, David Hallerman.

eMarketer says its new 2005 forecast assumes that revenues from Web search advertising, also known as paid search, will grow 40 percent year over year to $5.4 billion.

And with more than half of U.S. households estimated to have broadband connections, the medium is expected to receive a further boost in the coming years.

"The increased adoption of broadband will continue to evolve the face of interactive advertising as more compelling media ads and video formats are created," says Tom Hyland of PwC. "More and more, brand marketers will look to interactive [advertisements] as an integral platform to deliver rich experiences for brand building and enhancement."

Consumer product advertising form the largest category of advertisers, accounting for 49 percent of 2004 revenues. The largest consumer sub-categories include retail, automotive, leisure, entertainment and packaged goods.