Online Ad Revenue Continues to Spike

The IAB data yesterday is a good reminder that online advertising revenue growth is the real story in Web 2.0. Jason makes the same point here, and it’s an argument I’ve been making in presentations for years.

As the IAB figure shows, Q3 2006 ad spending was more than all of 1999 combined, as well as being up 33% year-over-year from 2005. Remarkable stuff.

Of course, the obvious question is the following one: Where is all this ad spending come from? If it’s incremental to existing ad spending, then we’re going to see a bunch of companies either see spikes in revenue (not likely), or get hit with increased marketing expenditures on their income statement. More realistically, of course, this is money taken from other media, as the following NAA figure shows.

Some of the growth is a reallocation of increased spending, but some of it is pure decline in older media, with broadcast, television, radio, and newspaper struggling in recent years. That is a trend that looks set to accelerate over the next twelve months, which will be financially painful indeed for such industries.


  1. TiVo, premium channels, and DVDs are impeding additional growth in broadcast/cable ads. I-Pod, podcast, and satellite radio do the same for conventional radio.
    The beat goes on, thanks for this chart.

  2. Paul,
    How? Looks like newspapers, magazines, broadcast and calbe TV are all up voer the same time.
    Perhaps to a lesser extent on a percentage basis- but they also started with a bigger base to begin with.
    Great blog.

  3. The growth in online advertising is almost entirely attributable to search marketing, or more specifically, the ability for anyone to buy clicks (whatever size budget) and target specific keywords/phrases. Google and Yahoo have in reality enabled a “long tail of advertisers” by connecting small-budget advertisers with the long tail of Web publishers. It’s not about content anymore, it’s about keywords/behaviors and knowing exactly what your cost-per-action comes to.
    I’m not sure how true it is that it’s money taken from other media. I wonder what the average monthly spend is for a Google advertiser — I’ll bet it’s much larger than the median, and 95% or more of Google advertisers are spending less than the average. I also suspect the majority of these “small businesses” haven’t yet nuked their yellow page advertising.

  4. 2004 had the presidential election. This will skew the table to show decreasing $$ from 04 to 05 in some or all categories making the straight line comparison over the three year period rather hard/useless.

  5. Paul, 3 comments:
    1] I’m writing this from home on Saturday night @ 8:30 PM (don’t mock me, I’ve got twin 4-year old boys). We can’t find anything of interest on 300 channels, so we left the hockey game playing on mute (can’t hear commercials) while I go through my RSS feeds (only ads I see are online) and the family decides on what to select from VOD (commercials won’t even be an issue in a few minutes).
    2] Received a phone call from friends 10 minutes ago and they are pretty much replaying our scenario over there.
    TV ads are suffering tonight.
    1] As you know, we provide online investor relations and marketing for small and micro-cap companies. I just returned from the PIPEs conference in New York where I gave a keynote speach titled “How To Run Great Investor Relations In A Web 2.0 World.”
    After presenting the advantages of using Google and Yahoo Finance to market themselves, the reaction was nothing short of outstanding. 2 deals already signed and a bunch more that will fall in the next 2-4 weeks. All of the dollars going to us to run campaigns on Google and Yahoo Finance are coming right out of direct mail and print.
    On the personal side and on the business side, changes in habit are going to continue the inevitable slide. I’m sure this was obvious to everyone already but these 3 VERY recent examples just continue to drive the point forward.

  6. Interesting to see the ‘trough’ in 2002. I’ve mentioned this article in my post about online marketing spend.

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