The Interent Will Soon Be Bigger Than…

According to the just-released IAB/PwC online ad revenues report, US online ad spending reached $5 billion for the second quarter and $10 billion for the first half of 2007. Year over year growth was just over 26%. Online ad revenues should hit or exceed $20 billion for the full year, 2007.

The distribution of revenues across ad categories is also follows:

• Search remains the largest revenue format, accounting for 41 percent of 2007 first six-month revenues, up slightly from the 40 percent reported in 2006. Search advertising revenues totaled $4.1 billion for the first six months of 2007, up 29 percent from the $3.2 billion for the same period in 2006.
• Display-related advertising revenues totaled $3.2 billion or 32 percent for the first six months of 2007, compared to the $2.4 billion (31 percent of total) reported for the same period in 2006. Display-related advertising includes Display ads (21% of 2007 first six-month revenues or $2.1 billion), Rich Media (7% or $699 million), Broadband Video (1% or $100 million), and Sponsorship (3% or $300 million).
• Classifieds revenues accounted for 17 percent of 2007 first six-month revenues or $1.7 billion, compared to the 20 percent or $1.6 billion reported for the same period in 2006.
  Lead Generation revenues accounted for 8 percent of 2007 first six-month revenues or $799 million, up from the 7 percent or $592 million reported for the same period of 2006.

What’s striking is that:

Online advertising continues to remain concentrated with the ten leading ad-selling companies, which accounted for 70 percent of total revenues in the second quarter of 2007, down slightly from 71 percent reported for the second quarter of 2006. Companies ranked 11th to 25th accounted for 12 percent of revenues for the second quarter of 2007, while companies ranked 26th to 50th accounted for 9 percent in the second quarter of 2007.

(Emphasis added.)

Assuming that the projections are fulfilled and US Internet ad revenues reach $20 billion, that will mean that as an ad medium the Internet is larger than:

• Yellow pages
• Radio
• Outdoor
• Most categories of TV (though not in the aggregate)
• Most categories of magazines

But consumers don’t trust online ads vs. traditional media advertising. That’s a problem for marketers that want to shift more of their budgets online to pursue those audiences. Internet ads have to be done much more thoughtfully than traditional advertising.

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Related: I didn’t go carefully through the math but this analysis pegs Google’s share of US online ad revs at 40%.

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