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Growth in revenue from online advertising slows

October 08, 2008|Alana Semuels

There's one thing that can be said about the new online advertising numbers released by the Interactive Advertising Bureau on Tuesday: They could have been worse.

Unfortunately, analysts say they probably will be soon.

Internet advertising revenue in the U.S. for the first half of 2008 totaled $11.5 billion, up 15.2% from the same period last year. Not so shabby, right?

When you consider that in 2007, revenue in the first half of the year was up 27% from the same period the previous year, and that in 2006, revenue climbed 36% from the previous year, the growth numbers aren't that impressive.

"From what I see, this is a similar pattern to the last slowdown in 2001," said David Silverman, a partner in the entertainment, media and communications practice at PricewaterhouseCoopers, which worked with the IAB to come up with the numbers.

Silverman said the second half of the year typically sees more spending than the first half. But this year, he said, this may be different "given the continuing slowdown and economic conditions."

Search sites continued to dominate online spending, accounting for 44% of money spent advertising online, up from 41% the previous year. Spending on classified advertising, at $1.6 billion, fell to just 14% of the pie.

Still, online looks positively healthy when compared with other sectors of advertising. ZenithOptimedia on Tuesday cut its forecasts for the overall U.S. advertising market in 2008 and 2009, predicting growth of 1.6% this year rather than the 3.4% it had initially projected. In 2009, ad spending in the U.S. will grow less than 1%, the firm said.

"All advertising is somewhat depressed, and online advertising has fared better than average," said Joe Apprendi, chief executive of Collective Media, a New York-based online advertising firm. "It's going to grow, which isn't the case with all media."

-- Alana Semuels

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