Companies Pouring Cash into Net Ads

SAN FRANCISCO (04/19/2000) - Lots of companies complain that Internet advertising doesn't work, but something's going right: Spending on Internet advertising continues to double every year. The Internet Advertising Bureau and PricewaterhouseCoopers announced today that Internet spending in 1999 reached $4.62 billion, a 141 percent increase over 1998's $1.92 billion.

The IAB Internet Ad Revenue Report also found that 1999's fourth-quarter spending grew to $1.7 billion, a 161 percent increase over the same quarter for 1998. "Online advertising is proving its strength," says Rich LeFurgy, chairman of the IAB. "The Internet combines the best of TV, direct-mail and retail transactions all on one platform." On a conference call with reporters, Pete Petrusky, the director of the new-media group at PricewaterhouseCoopers, and LeFurgy said 1999 was the fifth year for the Internet as an advertising medium and that it has done remarkably well compared with other ad vehicles.

They claimed that on an inflation-adjusted basis, TV brought in $3.7 billion in its fifth year (1953) while cable brought in $1.2 billion in 1984.

The report also found that the categories leading online spending during 1999 were: consumer-related (30 percent), financial services (19 percent), computing (19 percent), new media (6 percent) and business services (7 percent). The rash of dot-com e-commerce sites fall into the new-media category. According to the report, the great majority of revenue transactions continue to be cash-based (94 percent in the fourth quarter, 93 percent full year), with barter or trade deals accounting for the rest. Banner ads accounted for more than half the year's advertising; sponsorships made up a quarter. Meanwhile, interstitials, e-mail and rich media each grabbed a small piece of the pie. The companies also looked at how advertisers bought their online ads.

The majority dabbled with hybrid deals, a combination of CPM (paying per 1,000 impressions) and performance-based advertising. Straight CPM or impression-based deals accounted for 40 percent of the deals, and performance-based deals garnered less than 10 percent. Although the IAB made no predictions about 2000's spending, the group sounded optimistic. "Most of the Internet's revenue is coming from traditional consumer-related advertisers, and we expect that to continue," LeFurgy says. "The recent Nasdaq gyrations can only be good for Internet advertising. And 2000 will see b-to-b, wireless and rich-media increase the growth."