Online advertising revenue slips for the first time

Expenditure on online advertising has fallen for the first time, with third quarter spending figures down 6.5% on the second quarter.

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By  Mark Sutton Published  December 22, 2000

Expenditure on online advertising has fallen for the first time, with third quarter spending figures down 6.5% on the second quarter.

Online advertising revenue dipped by 6.5% in the third quarter of 2000, marking the first quarter-to-quarter decline recorded by the new medium. Ad revenues still grew from Q3 1999, with expenditure on online advertising at $6.1 billion so far, and set to reach $8 billion by the year end, up from $4.6 billion last year, according to research by the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers.

The decline in advertising revenue, which totalled $1.9 billion in Q3, was attributed mainly to due to a lack of confidence in dot.coms and changing models of Internet advertising.

Among the dot.coms that have been affected by the dip in ad revenues is Yahoo and RealNetworks, producer of the RealPlayer Internet media software. Both companies have posted earnings warnings because of declining revenues.

IAB chairman Richard LeFurgy was unperturbed by the findings: “As expected there has been a slight softening in ad revenue, but we are still looking at an $8-10 billion dollar medium this year,” he said.

LeFurgy said that the dot.coms that were falling off in terms of advertising expenditure were being replaced by traditional businesses looking for new channels to advertise.

“There is no doubt that traditional advertisers are increasing their online spending, as the $6 billion year-to-date attests,” he said. “These savvy advertisers are seeking different ways and new creative formats, which publishers are offering to build their brands. This is an industry innovation, and the serious players are in it for the long haul.”

The online advertising market is dominated by consumer-related advertising, mostly automobiles and retail, with computing and financial services also popular. One aspect of advertising that seems to be losing its popularity as more sophisticated models emerge is the trusty banner ad.

Banner ad spending dropped from 50% of total online advertising spending in the second quarter to 46% in the third. Sponsorship and classified ads are replacing the banner in the online revenue stream.

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