Growth in revenue from online advertising slows

Internet advertising revenue in the U.S. for the first half of 2008 totaled $11.5 billion, up 15.2% from the same period last year. Not so shabby, right?

When you consider that in 2007, revenue in the first half of the year was up 27% from the same period the previous year, and that in 2006, revenue climbed 36% from the previous year, the growth numbers aren't that impressive.

"From what I see, this is a similar pattern to the last slowdown in 2001," said David Silverman, a partner in the entertainment, media and communications practice at PricewaterhouseCoopers, which worked with the IAB to come up with the numbers.

Silverman said the second half of the year typically sees more spending than the first half. But this year, he said, this may be different "given the continuing slowdown and economic conditions."

Search sites continued to dominate online spending, accounting for 44% of money spent advertising online, up from 41% the previous year. Spending on classified advertising, at $1.6 billion, fell to just 14% of the pie.

Still, online looks positively healthy when compared with other sectors of advertising. ZenithOptimedia on Tuesday cut its forecasts for the overall U.S. advertising market in 2008 and 2009, predicting growth of 1.6% this year rather than the 3.4% it had initially projected. In 2009, ad spending in the U.S. will grow less than 1%, the firm said.

"All advertising is somewhat depressed, and online advertising has fared better than average," said Joe Apprendi, chief executive of Collective Media, a New York-based online advertising firm. "It's going to grow, which isn't the case with all media."

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Alana Semuels



YouTube kicks off 'click to buy'

Ever watched a video on YouTube and wanted to buy the song? YouTube is counting on it. The world's most popular video-sharing site is hoping to make money from its huge audience by installing buttons under YouTube videos so that the ability to buy the music and video games featured in the video clip is just one click away.

The "click to buy" buttons, which began appearing in the United States on Tuesday, connect viewers to the product page on Amazon.com or Apple Inc.'s iTunes store.

To start, YouTube, which will receive a commission for each sale, is selling songs from two major labels -- EMI Music and Universal Music Group -- and video games from Electronic Arts Inc. Eventually it wants to expand to sales of other products such as movies, television shows and concert tickets.

"This is the first step in a viable e-commerce platform," said Bakari Brock, business affairs counsel at YouTube.

It's another effort by the video-sharing site to figure out how to profit from its popularity. So far, YouTube has mainly focused on advertising as a source of income, including text ads that run along the bottom of videos as they play, contests sponsored by advertisers and home-page video ads. But it has begun to experiment with new ways to take advantage of the site, which attracts nearly 100 million people a month in the U.S.

Google Inc. bought YouTube two years ago for $1.65 billion. Google Chief Executive Eric Schmidt has pledged to investors that YouTube will make money once it hits on the right formula. Last month he said Google was being patient.

"We are where we should be," he said. Yet revenue this year is expected to be only about $200 million.

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Jessica Guynn