After the Great Dot-Com Crash of 2000, many wondered if online advertising -- an industry that had once powered Yahoo! (NASDAQ:YHOO) to a $90 billion market cap -- would ever again be relevant. But figures released this week confirm what we've known for several months: It's alive and well -- and growing.
The Interactive Advertising Bureau (IAB) says Internet ad sales totaled $1.66 billion in the past three months. That's a spike of 14% over the same period last year, and the third straight quarter of growth -- following seven straight quarters of decline. "Our prognosis for a continued and steady recovery is being realized," says IAB president Greg Stuart, "and the outlook remains bright."
The recovery would look even better, The Wall Street Journal points out, if not for the performance of Time Warner's (NYSE:TWX) America Online unit, which has seen a 45% drop in ad revenue in the first half of 2003. AOL has been hurt for months as long-term contracts have expired without renewal, but it is predicting ad growth next year for the first time in three years, according to the paper.
Keyword search advertising has led the comeback. Better known as pay-per-click, advertisers generally bid for choice placement in a list of search results. Yahoo!'s Overture and Google are the leaders in this category. Keyword search is now responsible for nearly a third of all online ad revenue. And good news for surfers: Banner advertising continues to decline, falling from 32% of total sales a year ago to 22% today.
Even with all the optimism, it's important to keep things in proper perspective. Last quarter's $1.66 billion is still off the $2.09 billion recorded in the second quarter of 2000. Still, continued strength in broadband growth bodes well for the industry. "The Internet holds the promise of delivering the right audience at the right time," says Tom Hyland of PricewaterhouseCoopers New Media Group, which conducted the study for IAB. And that's "a winning combination for marketers of any type."
Do you think the online ad market will continue to grow, or will it head back south? Let us know your thoughts, on the Yahoo! discussion board .
