US online advertising revenue shot up sharply 26 percent year on year to a record $4.9 billion in the first quarter of 2007, according to the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC). The latest trend, marketers have started putting more money into online advertising, has enriched online powerhouses like Google Inc. and has bothered other more established media like newspapers. The growth in online advertising has stimulated a consolidation in the industry, with online services companies Google Inc., Yahoo Inc. and Microsoft Corp. all making substantial acquisitions of advertising companies in recent months.
Advertisers have been increasing their online spending since the last quarter of 2003 with a view to access consumers who are increasingly surfing the Web as a substitute of reading newspapers, watching television and listening to the radio. The change in strategy has been proved to be immensely beneficial for Google, the largest online ad network and already one of the country’s most moneymaking firms, despite spending just nine years in business. In the meantime, other media channels are cutting back their staffs and slashing other costs as they try to counterbalance recent other revenue losses and support for even more financial pain.
The annual spending report for 2006 also shows combined revenues approaching $17 billion. In a separate survey, the IAB’s European division, along with PwC, revealed interactive advertising in Europe has already touched $10.8 billion mark in 2006, with the UK taking up the biggest share at 39 percent of online advertising spending, followed by a remote 22 percent in Germany, and 15 percent for France.
However, the major part of spending revolved around search-related advertising, at 45 percent according to the study, whereas display advertising constituted 31 percent, 22 percent to classifieds and 1.6 percent on e-mail marketing. At the same time, Yahoo has been broadly recognized as the leader in display advertising, and its stock rise in tandem with the growth in online ad spending. Shares of Yahoo have increased 11 percent this year. In the mean time, Clayton Moran, an analyst with Stanford Group, has predicted that overall online ad spending will increase 25 percent this year.
